The compliance line: How to engage independent contractors without crossing it

Introduction: The compliance line is thinner than ever

Hybrid work, cross-border projects, and rising freelancer demand have blurred the line between “independent contractor” and “employee.”
That line still remains a legal boundary, however, and crossing it can be costly.
In both the U.S. and Canada, regulators continue tightening definitions around employment status, exposing enterprises to back taxes, penalties, and reputational damage.

That’s why leading organizations are turning to Agent of Record (AOR) partners to manage contractor engagements compliantly.
Procom helps enterprises walk that line with precision, not fear.

1. Why the rules keep changing

• The U.S. Department of Labor reintroduced a stricter “economic realities” test in 2024.
• Several states, including California and New Jersey, apply the ABC test that presumes employee status unless each criterion is met.
• In Canada, the CRA and provincial agencies use control and integration tests that often classify full-time or long-term contractors as employees.

For enterprises operating across borders, the result is a compliance minefield, and one that requires localized knowledge and consistent documentation.

2. What an Agent of Record does

An AOR acts as the legal engagement entity for independent contractors, handling:

• Verification of business status and tax registrations
• Contract drafting that reflects true independence
• Collection and storage of compliance documentation
• Payment processing and reporting on behalf of the enterprise

The AOR assumes administrative and legal responsibility for compliant contractor engagement, without converting them to employees.

3. The risks of DIY contractor management

Many organizations still treat independent contractors as vendors, managing agreements through AP systems without HR oversight.
That creates four common failures:

1. Missing classification tests and IC questionnaires.
2. Inconsistent contracts or tax forms.
3. No visibility into expiry dates or renewals.
4. No insurance coverage if misclassification is found.

Procom’s AOR framework prevents these gaps through centralized governance, standardized contracts, and real-time visibility in MyProcom.

4. Clarity for Finance, Confidence for Compliance

Procurement teams gain budget predictability with clear AOR pricing (no hidden mark-ups or pass-through fees).
Legal and Compliance gain assurance through Procom’s audit-ready documentation, so every contract is stored and every record is traceable. 

5. Why local expertise matters

Global aggregators may cover 150 countries, but few understand North American nuance.
Procom’s teams live where you hire, understanding CRA, WSIB, IRS, and state labor requirements in real time.
That depth keeps programs compliant and contractors confident.

Key Takeaway

Compliance isn’t a checkbox—it’s a culture.
An Agent of Record gives enterprises a structured, legally defensible way to work with independent talent while maintaining control and visibility.
At Procom, we make sure you stay on the right side of the line.

Stay compliant, stay confident.

Download Procom’s Independent Contractor Compliance Checklist to audit your current program.