Do you know the difference between an independent contractor and an employee? Maybe. That understanding is sometimes challenged, though, when those classifications are applied to members of the legal field. Admittedly, the concept of freelance legal professionals can be hard to grasp and is sometimes confused with employees. More than once I’ve heard an attorney say, “No, I’m not hiring” or, “Yes, I’m looking to hire” when talking with a freelance paralegal or freelance attorney. Hopefully, this post will help clarify the difference between an employee and a freelance legal professional.
Freelance paralegals and freelance attorneys are independent contractors. In other words, they are business owners providing their professional services to solo practitioners, law firms, corporations, and governmental agencies. Freelance paralegals and freelance attorneys are not employees. They aren’t for hire. They’re not looking for employment (well, maybe some are but that’s not what they’re doing when they’re offering professional services). They provide substantive legal support to attorneys who are looking for extra help, who are trying to manage their caseload, who are looking to enhance their legal services, or who are looking to maximize their time; they’re looking for an alternative solution to hiring — oftentimes when hiring isn’t a viable solution.
Here are a few notable differences between employees and independent contractors:
With employees, an attorney:
- When an employee will work;
- Where an employee will work;
- The tools the employee will use to perform the work; and
- How much the employee will be paid;
- Generally reimburses the employee’s expenses;
- Withholds taxes from the employee’s paycheck; and
- Social security, worker’s compensation, and unemployment insurance;
- Sick leave, vacation leave, and retirement benefits;
- Health and dental insurance; and
As a business owner, a freelance legal professional:
- When s/he will work;
- Where the work is done; and
- What tools will be used to perform the work;
- Sets fees for services;
- Pays own overhead/expenses;
- Pays own taxes;
- Doesn’t receive sick or vacation time;
- Is responsible for own insurance;
- Is responsible for own retirement; and
- Generally works with more than one attorney/firm.
These differences are what benefit attorneys looking for alternative means of support. While not always the case, freelance legal professionals provide their services from their own office, not the attorney’s office. As a result, the attorney doesn’t have the expense of office space, rent, utilities, equipment, or supplies for that person, eliminating significant overhead. Similarly, attorneys reduce overhead across many departments, including human resources, when they work with a freelance paralegal or attorney because they do not have the expense of advertising, reviewing, interviewing, and training a new employee.
When the work is completed, the freelance attorney or paralegal submits an invoice to the attorney for payment. The invoice consists of the charge(s) for the services rendered; the attorney is not responsible for the freelancer’s operating expenses, doesn’t have to provide a certain number of hours each week, withhold taxes, pay social security, worker’s compensation insurance, unemployment insurance, or medicare, leave, health, or retirement benefits. The invoice for services rendered is all the attorney pays. And, while the freelance legal professional is helping the attorney with his or her client’s case the attorney, in all senses, is a client of the freelance legal professional.
Attorneys and freelance legal professionals are similar in many ways: They each set their own schedule, establish their own fees, determine what tools are necessary for their work, pay their own operating expenses, and cover their own employment-related taxes, insurance, and benefits. Just like attorneys, freelance legal professionals are retained for their services; they are not hired as employees by their clients. The difference between employees and independent contractors is why freelance legal professionals are a cost-effective solution for attorneys looking for alternatives to hiring.
For more information on the difference between employees and independent contractors, check out the Internal Revenue Service’s Publication 15-A: Employer’s Supplemental Tax Guide. Jurisdictionally relevant statutes and case law also play a significant role in distinguishing employees and independent contractors.