Can I pay an independent contractor a high rate against future revenue with the downside that they might not make minimum wage?

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Can I pay an independent contractor a high rate against future revenue with the downside that they might not make minimum wage?

Asked on June 9, 2013 under Employment Labor Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

IF the person truly is an independent contractor, you can pay him/her however you and he/she agree; independent contractors are not employees and are not covered by minimum wage requirements. Note though, that just because you call someone an independent contractor or issue him/her a form 1099 does not, by itself, make him/her an independent contractor. An independent contractor is, as the name implies, "independent" to at least some significant degree: e.g. he/she controls how the job is done; provides own tools and equipment; has at least some say over hours and place of work (some work may need to be done at your location or during certain hours, but anything where the contractor could be flexible, he or she must be free to be flexible); can make a profit or realize a loss; markets or advertises own services; usually has more than one client/customer, if not exactly at the same time, at least in succession. If on the other hand, the "independent contractor" works only for you and in essentially all respects but name functions as an employee, the law will treat him/her as an employee and you will have to pay minimum wage, pay the employer portion of withholding, etc.


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