The fact that he hired employees may have bearing on his status, and it may very well support your position that he was an independent contractor. However, many more facts are needed in order to determine whether he was an independent contractor.
Generally, the main issue is how much control you exerted over the work he performed for you. For example, did you set his hours? Did he work from your premises or elsewhere? Did he use equipment provided by you or his own? Was he free to pursue other work while he worked for you? These are just a few of the many questions you will need to answer.
It is impossible to have a full, meaningful discussion of this issue in an online forum like Avvo. You should retain an attorney ASAP to discuss the specific situation and to determine your options going forward.
There are about 20 factors which may be considered in determining an employee/independent contractor status. Who hired individuals is just one of them. The factors may vary in importance depending on the nature of the business.
There is a legal presumption that presumes a person hired to provide services to a business is an employee. To overcome that presumption, the employer must be prepared to show the person is truly an independent contractor. Improper classification can cause innumerable financial problems. You need to sit down with an attorney who can review all aspects of your business and the relationship you have with the people who serve your company.
They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion based on very limited information. My opinion should not be taken as legal advice. For true advice, we would require a confidential consultation where I would ask you questions and get your complete story. This is a public forum, so remember, nothing here is confidential. Nor am I your attorney. I do not know who you are and you have not hired me to provide any legal service. To do so would require us to meet and sign written retainer agreement. My responses are intended for general information only.
What you have provided is a fraction of the information necessary to determine whether a worker is a contractor or employee. It's a factual determination based on the totality of the circumstances.
If you are being sued for unpaid overtime or any number of other claims an allegedly misclassified contractor can bring against their employer, you need to retain an attorney immediately. Locate one using the "Find a Lawyer" function above. Good luck.
This answer is a general interpretation of the law and is not fact specific to your case. Likewise it does not create an attorney-client relationship. You should seek an attorney for a review of your specific facts and documents. http://www.johnphillipslaw.com
You need to have a clearly defined written contract identifying the specific relationship you have with your contractor which clearly provides he is not an employee nor does he have the ability to hire any employees for you. This can be accomplished. Without have a written contract it leaves all these legal issues up in the air and leaves you in a position of the court listening to what you say as compared to what he says.
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