If you are an employer in New Hampshire, you must report wages to New Hampshire Employment Security (NHES). The exception would be for independent contractors or subcontractors working for you who are self-employed. There is an ABC test that addresses questions about what employment is exempt from coverage under New Hampshire’s unemployment compensation law. If there was ever a question about services performed by a self-employed individual, you must show to the satisfaction of the Commissioner of NHES that:
A. The individual has been and will continue to be free from control or direction over the performance of such services, both under contract of service and in fact; and
B. Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
C. Such individual is customarily engaged in an independently established trade, occupation, profession, or business.
All three conditions must be met for the services to not be subject to the law as an employee. Below are some tips to help establish independence with subcontractors so they are not mistaken by NHES as an employee:
- Obtain a certificate of insurance from the independent contractor every year.
- If the independent contractor does not have a Federal Employer Identification Number (FEIN), strongly suggest that they obtain one.
- If the 1099 is being issued to an independent contractor using a social security number, make sure the DBA (doing business as) is included under the recipient’s name field.
- If you cannot obtain a certificate of insurance and the independent contractor and they do not have FEIN, keep a file that at least has their business card or a printout of their website to show they are independently established.