We have an independent contractor who works outside of our payroll. Are we liable to pay overtime if she reported she worked over 40 hours a week?


It depends. Check the contract. Independent contractors are paid according to their contracts, not according to laws governing employment. If the contract includes a clause saying that overtime rates are charged for work over 40 hours in a week, then you would pay overtime rates per the contract for work over 40 hours in a week. A cost-plus contract might include an overtime clause.

On the other hand, if the contract specifies a certain deliverable for a set fee, then hours worked does not come into it. But we gather from your question that the contractor is reporting hours worked, so check to see what the contract agreement is.

Caveat: Be sure a contractor legitimately qualifies as a contractor; the IRS has been getting tough on companies that have workers that effectively function as employees but that the company has classified as contractors. See IRS Goes After Misclassification of Workers; Also see the three principles used by the IRS to determine whether a worker is an employee or contractor, in Form 1099-MISC Filing Basics.

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