Independent Contractor vs. Employee
Friday, April 13th, 2007The courts have considered many facts in deciding
whether a worker is an independent contractor or an
employee. These relevant facts fall into three main
categories: behavioral control; financial control; and
relationship of the parties. In each case, it is very
important to consider all the facts – no single fact
provides the answer. Carefully review the following
definitions.
BEHAVIORAL CONTROL
These facts show whether there is a right to direct or
control how the worker does the work. A worker is an
employee when the business has the right to direct and
control the worker. The business does not have to
actually direct or control the way the work is done – as
long as the employer has the right to direct and control
the work. For example:
Instructions – if you receive extensive
instructions on how work is to be done, this
suggests that you are an employee. Instructions
can cover a wide range of topics, for example:
how, when, or where to do the work
what tools or equipment to use
what assistants to hire to help with
the work
where to purchase supplies and
services
If you receive less extensive instructions about
what should be done, but not how it should be
done, you may be an independent contractor.
For instance, instructions about time and place
may be less important than directions on how the
work is performed
Training – if the business provides you
with training about required procedures
and methods, this indicates that the business
wants the work done in a certain way, and
this suggests that you may be an employee.
FINANCIAL CONTROL
These facts show whether there is a right to direct or
control the business part of the work. For example:
if you have a
significant investment in your work, you may bean independent contractor. While there
is no precise dollar test, the investment must have
substance. However, a significant investment is
not necessary to be an independent contractor.
Expenses
– if you are not reimbursed for some
or all business expenses, then you may be an
independent contractor, especially
if your unreimbursed business expenses are high.
Opportunity for Profit or Loss – if
you can realize a profit or incur a loss, this
suggests that you are in business for yourself and
that you may be an independent contractor.
RELATIONSHIP OF PARTIES
These are facts that illustrate how the business and the
worker perceive their relationship. For example:
Employee Benefits – if you receive benefits,
such as insurance, pension, or paid
leave, this is an indication that you may be an
employee. If you do not receive benefits,
however, you could be either an employee or an
independent contractor.
WRITTEN CONTRACT
– a written contract
may show what both you and the business
intend. This may be very significant if it is
difficult, if not impossible, to determine
status based on other facts.