As your equine business grows, you could quickly find yourself needing some extra help to keep up with day-to-day operations. Below you will find helpful tips you can use when hiring for your horse farm.

Hiring for your horse farm legally is critical for your equine business, both from a tax and legal standpoint. Hiring for your horse farm impacts your federal, state, and local payroll taxes. Legally, you must comply with local and federal employment laws. 

But, good news! This post breaks down everything you need to know about hiring legally for your horse farm. 

Table of Contents: 

• The three types of hiring 
• Employees v. independent contractors (and why you need to know the difference)
• The consequences of misclassified hiring at your horse farm
• How to hire an intern (paid or unpaid) for your horse farm
• The process for hiring for your horse farm

The three different types of hiring

There are essentially three different ways to hire: employees, independent contractors, or interns. Let’s break down all three: 

• Independent contractors work part-time and are not entitled to the same benefits or federal tax withholdings as an employee. (More details below.)
• Employees work either part-time or full-time and are entitled to benefits and federal tax withholdings.
• Interns are typically students who work for a set period of time.

Equine businesses, such as boarding and training facilities, often require someone to help with everything from turnouts to feeding times. It’s especially important that equine business owners know if they’re hiring an independent contractor or an employee. This is because most horse farms require hires to perform their work at a specific location and time.

First, why should you care about independent contractors v. employees? 

Hiring an employee or an independent contractor will have different impacts on your equine business. So, it’s important to know the difference between the two!

If you have an employee, you’re required to withhold federal, state, and local payroll taxes. Plus, you’ll also have to comply with employment laws (think wage laws, safety, hours, immigration status, and working conditions.) For example, under employment laws, you’d be responsible for what your employees do while they are on the job.

If an employee is injured on the job, you may be legally liable for their injuries. This is also why several states require the employer to carry workers’ compensation insurance. On the other hand, as an equine business owner, your liability for hired contractors is much more limited. Plus, contractors are responsible for their own taxes and insurance.

With these requirements in mind, let’s compare the two classifications and discuss why you might choose one over the other.

Employees v. Contractors

Determining whether or not a hire is an employee or a contractor is a complex test based on multiple factors. You can find a complete look at what factors the IRS considers here, but below we discuss the main questions you need to ask yourself.

1. Are the workers full or part time?
   1. Determining whether a hire is a contractor or employee isn’t just contingent upon the hours they work. It also depends on their ability to work for other horse farms. For example, many employees will have a noncompete within their employment contract.
   2. Here is a common mistake. A hire doesn’t necessarily have to work 40 hours or more to be considered an employee. They also don’t have to work less than 40 hours to be considered a contractor.
      1. Is it difficult for the hire to work somewhere else because of the structured hours you have established? They’re probably an employee. 
      2. Is the hire permitted to and does their schedule allow them to help out other barns? It’s more likely they’re a contractor instead. 
2. Speaking of hours, does the hire have set hours that they work?
   1. As the barn owner, do you set the exact hours the hire is at work? If so, they’re probably an employee. 
   2. This is where horse farm owners are more prone to have their hires classified as employees rather than contractors. After all, horses’ schedules are like clockwork. They need to be fed around the same time each day, morning and night. Turnout times are typically a pattern as well.
   3. If someone is just working for your equine business in a limited capacity, like mucking out stalls and you tell that person the job can be performed at any time of the day, they’re probably a contractor.
   4. If you’re hiring someone to feed exactly at 6:00AM every day and 6:00PM every evening, and do a few odd jobs in between (like cleaning out stalls, turning out horses, etc.), they’re probably an employee.
3. What control does the hire have over the money they make?
   1. This can be a bit of a tricky one. But, does the hire have any control over whether they can make a profit?
   2. The less control the hire has over whether they make a profit or a loss, the more likely they are to be employees rather than independent contractors.
   3. Going with our example from above, if you pay someone by the number of stalls they clean, they’re probably a contractor (they can choose to take on more or less work.) 
   4. If a business pays a hire a set salary no matter how much work they perform, they’re probably an employee. 
4. Does the equine business reimburse the hire for business expenses?
   1. If the answer’s yes, they’re most likely employees. For example, do you have a trainer who comes in to work some of the horses and occasionally needs equipment such as new saddle pads, bell boots, etc? If you reimburse the trainer for that equipment, they’re more likely an employee. If the trainer picks up these costs herself, she’s more likely a contractor. 
5. Does the equine business provide equipment and supplies for its hires?
   1. This factor is fairly self-explanatory. Does the horse farm provide all (or most of) the supplies needed for the job? For example, the tractor, the shavings, the horses’ equipment? They’re likely an employee. 
   2. Does the hire bring most of their own equipment to perform the job? Maybe they just borrow something like the horse farm’s tractor? The hire is likely a contractor. 
6. How does the horse farm hire its workers?
   1. When you hired your worker, did you have them sign an employment contract, offering benefits, tax withholdings, and worker’s comp insurance? If yes, they’re probably an employee. 
   2. Did you put out a notice asking for a little extra help? Do they just help out with odd jobs here and there? Maybe you had them sign a contractor agreement, maybe not. If this is the case, they’re a contractor. 
7. How does the horse farm train its hires?
   1. The more training the barn provides for its hires, the more likely they’ll be considered employees.
   2. For example, if you’ve hired someone based on their references and knowledge of the job, and they only have to have basic instructions to start the job (in addition to some of the factors above), they’re probably a contractor.
   3. If, on the other hand, the equestrian business puts their hires through a rigorous two-week training program and requires their hire to arrive and leave at set times and perform their tasks in specific ways, they’re more likely an employee. 

What happens if a horse farm misclassifies a hire?

As you can see, the factors between a contractor and an employee can be a little tricky to decipher. But, it is important to correctly classify your hires.

The surest way to know how to classify your hires is to use either an independent contractor agreement or an employment agreement. (Whichever is appropriate for your situation.) This defines the employment relationship in black-and-white writing.

But what can go wrong if an equestrian business misclassifies their hire? For starters, if the IRS audits the barn, it could be liable for years of back payroll taxes and penalties. You’ll also have to think about what happens if your hire injures themself on the job. If they are an employee, they may be able to file a claim with your state’s agency. This could lead to massive legal liability for your horse farm and is obviously something you’d want to avoid. 

Can hiring an intern for your horse farm avoid some of this hassle?

Yes, technically any business can hire an intern!

But, don’t think you can get cheap work by just hiring interns instead of contractors or employees. There are strict laws when it comes to hiring interns.

Yes, you can hire unpaid interns. But, I wouldn’t recommend it unless you’re hiring them through a school (such as an externship program.)

If your equine business is “for-profit” (i.e., if you make any money with your business), you have to pay your interns at least minimum wage. You also have to provide overtime pay under the Fair Labor Standards Act (FLSA). Again, if you’re hiring them as an extern (where the student gets class credit in exchange for working for you), this won’t apply.

But, if you’re hiring an intern, the law requires you to pay them unless you can pass this test: 

The Test for Unpaid Interns and Students

Courts have used the following 7 factor “primary beneficiary test” to determine whether an intern or student is, in fact, an employee under the FLSA:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, expressed or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The degree to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The degree to which the intern’s work complements, rather than displaces, the work of paid employees, while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No single factor is determinative, which means that the courts examine every case independently. If the analysis confirms that the intern or student is not an employee, then he or she is not entitled to either minimum wage or overtime pay under the FLSA.

The legal process for hiring at your horse farm

First, it’s important to note that every state has different state laws. So, if you have any questions about what’s best for your equestrian business, it’s best to reach out to an attorney in your state. 

Because horse farms and equestrian businesses typically require hires to perform their tasks in person, at set times, using the horse farm’s equipment, etc., their hires are most likely to be employees, rather than contractors. 

So, when hiring an employee for your equestrian business, here’s a quick list of what you need to know:

• Use an employment agreement, independent contractor agreement, or intern agreement (whichever is most appropriate for you). This will help define the relationship in black-and-white ink, leaving out the ambiguity of all of the above factors.
• File for an Employment Identification Number (EIN). This IRS requires an EIN for reporting taxes and other information about your employee(s). 
• Verify the individual you hire is legally able to work in the United States. 
• Hire a payroll service to help document any disability insurance you may need for employees. 
• Establish payroll taxes, worker’s compensation, and unemployment insurance.
• Establish a recordkeeping system to provide proof of how many hours the hire works.

If you’re looking to hire an employee, visit the Small Business Administration at www.sba.gov/content/hire-your-first-employee for additional information.

In conclusion…

Hiring any type of worker for your equestrian business is an extremely important decision, and knowing what type of hire you want to make is perhaps the most important decision. Again, the best step you can take to protect your business when hiring is to define the business relationship in writing.

Never hesitate to reach out to an attorney in your state to discuss your specific situation and seek guidance on how to protect your own equine business from potential liability.

Looking for tips on how to hire for an online position? Check out this post.

Mentioned in this article:

• The Best Business Structure for Your Farm
• Equine Law: The Horse Owner’s Ultimate Guide
• The Horse Owner’s Complete Guide to Liability
• Horse Business Tax Deductions

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