Workers’ Compensation, unemployment insurance, the IRS… They all must make determinations regarding whether workers are employees or independent contractors. Different tests are used by the various organizations, but they all have a common theme. The bottom line is that if a preponderance of the information indicates the worker is an employee it doesn’t matter what title has been assigned by the employer. An employee, by any name, is still an employee.
In each of these 20 areas, the first statement applies to employees, while the second applies to contractors.
ISSUE EMPLOYEE INDEPENDENT CONTRACTOR
• Required to comply with employer’s instructions as to how to do the job.
• Follows own instructions.
• Required to be trained by employer how to do the job.
• Does not require training from employer.
• Services are fully integrated into employer’s business, which is significantly depedent upon them.
• Services not integrated into employer’s business.
• Required to perform services personally.
• Not required to perform services personally.
• Assistants are hired, supervised and paid by employer.
• Generally hires own assistants.
• A continuing economic relationship which may include work at recurring but irregular intervals.
• No assumption of continuing relationship.
7. Hours of work
• Required to perform within set hours of work specified by employer.
• Free to establish own hours of work.
8. Time required
• Usually devotes full-time to employer’s business, may be restricted from performing work for others.
• May work at any time and for whom he chooses.
9. Work location
• Performs work on employer’s premises. (Importance dependent on nature of work and requirement, if any, of employer.)
• Work may be performed anywhere, often at worker’s office or location.
10. Sequence of work
• Follows orders or sequence of work set by employer.
• Free to accomplish work in any sequence.
• Generally makes regular or periodic, either oral or written, reports to employer.
• Not necessarily required to submit regular reports.
• Is generally paid by time, i.e. hour, week or month.
• Is generally paid by result or straight commission.
• Is generally reimbursed for business-related expenses, implying right of regulation and direction by employer.
• Generally covers own expenses and expenses may be included in total payment.
14. Tools and materials
• Tools and materials needed for job are provided by employer.
• Uses his own tools and materials to accomplish work.
15. Facility investment
• Generally has no investment in facilities required to accomplish work, indicating dependence on employer’s facilities.
• Has an investment in facilities, such as an office rented from third party.
16. Profit or loss
• Cannot realize a profit or loss on his services.
• Has an exposure to economic gain or loss on services.
17. Simultaneous Work
• Performs work under a single financial arrangement.
• Performs work simultaneously for multiple, entities.
18. General Public
• Does not make services available to general public.
• Regularly makes services available to general public.
• Employer can fire and thereby control nature and pace of work through threat of firing.
• Cannot be discharged so long as result is satisfactory.
• Can quit at any time without liability.
• Can terminate with risk of breach of contract liability.