Understanding the Risks of Including Contractors in Performance Reviews

Including contractors in performance reviews has legal implications, including potential misclassification risks under employment laws.

Why This Matters

Employment laws distinguish between employees and independent contractors based on factors such as control, autonomy, and work structure. Conducting performance evaluations for contractors in the same manner as employees can blur these distinctions, potentially leading to:

• Worker Misclassification Claims – Contractors who are treated like employees may claim entitlement to employee benefits, protections, and rights.
• Legal & Financial Penalties – Misclassification can result in fines, back pay obligations, and tax liabilities imposed by labor authorities.
• Contractual Breaches – Reviewing contractor performance using employee-focused criteria may violate contractual agreements and create disputes.

Best Practices for Managing Contractor Performance

If your organization wants to provide feedback to contractors while maintaining legal compliance, consider the following alternatives:

• Use Contract-Based Evaluations – Assess contractors based on deliverables and contract terms rather than employee-like performance metrics.
• Keep Reviews Separate – If you must review both employees and contractors, ensure distinct processes are used to reflect their different working relationships.
• Consult Legal Counsel – Before running a review of your contractors, consult your HR or legal team to ensure compliance with applicable laws.

Next Steps

If you’re unsure whether your review cycle includes contractors in a way that could create risk, we recommend:

1. Reviewing your organization’s worker classification policies.
2. Consulting with legal experts for guidance.
3. Adjusting your performance management approach to align with best practices.

By taking these precautions, you can manage worker performance effectively while avoiding unnecessary legal risks. If you have further questions, please contact your HR or legal team for specific advice.