Succeeding in Your Business: You can spy on your employees, but can you spy on your independent contractors?

“I read with interest a column you did a while back on whether or not you can legally spy on what your employees are doing on the Internet. I have a ‘virtual company’ with one or two full-time employees, but work with several independent contractors who work out of their homes. Occasionally, we have meetings at the office and the contractors bring their laptops to work on while they’re here. Do I have the same rights to spy on their online activities as I do with my employees?”

In a word, no.

You do have a legitimate concern about your independent contractors engaging in online conduct that would embarrass you or your company, or subject you to legal liability. But I think that concern is outweighed by the fact that you cannot legally direct and control an independent contractor’s activities the way you can your employees’. Spying on your independent contractor’s online activity dramatically increases the risk that the IRS or some other government agency will reclassify your independent contractors as “employees,” with disastrous consequences for you and your business.

    It gets worse. When someone is your independent contractor, you must give him the opportunity to work for other companies. As you (hopefully) have done, those other companies have made these contractors sign confidentiality or nondisclosure agreements promising to keep all of their clients’ information confidential so company A doesn’t find out what company B is up to, company B doesn’t find out what company C is up to and so forth.

By spying on your independent contractors’ laptops, you may find yourself viewing confidential data of other companies, causing your contractors to breach their duty of confidentiality to their other clients. There’s also a strong possibility that if another company finds out you had access to its confidential information, it would sue you for inducing the contractor to breach his nondisclosure agreement.
        The best protection against illegal online activity by an independent contractor is to put some strong language in your contractor agreement prohibiting it, specifically the following:

• Your agreement should require contractors to abide by “all reasonable rules and regulations” of your company when they are working on your premises, including your Internet use and email policy. Make sure each contractor gets a copy and signs a receipt acknowledging that he or she understands it.

• The contractor should indemnify you for any conduct that gets you into legal trouble (this means the contractor will pick up all costs of defending a lawsuit and pay any judgment or settlement against you).

• Get this indemnity from the contractor herself, not her corporation or limited liability company (LLC). You want her to know that if she even thinks of doing something online to injure your company, her house will be at risk.

• Finally, require all of your contractors to obtain errors and omissions insurance for their indemnity obligations, and name your business an additional insured on all E&O policies they carry.

When it comes to your home-based employees, the law is a little murkier. Since these people are “employees” for tax purposes, you have the right to direct and control their activities while they’re on company time. Yet because home-based workers often mix business and personal activities, there’s a good chance that being able to monitor their online activities will constitute illegal invasion of privacy if it’s done too aggressively. Do you really want to know what websites your employee’s teenage son is viewing on Dad’s computer while his parents are out to dinner?

The best protection in this instance would be to have each employee sign a document promising to dedicate at least one computer to company business and refrain from putting any non-work-related software or information on it. Better yet, provide a dedicated laptop for each employee with a lock preventing downloads of personal or nonbusiness software without your knowledge.

But use common sense. One of the main reasons people want to work for smaller businesses is freedom from the rigid, bureaucratic and sometimes silly cubicle rules that bigger companies impose on their employees. When developing any policy for employees” Internet or email use, weigh your need for protection against your desire to create a warm, flexible, empowering and fun workplace that employees will kill to be part of.

Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt.” 

COPYRIGHT 2020 CLIFFORD R. ENNICO
DISTRIBUTED BY CREATORS.COM