Whether to classify a worker as an independent contractor or an employee is a critical decision, one which affects many different aspects of the company-worker relationship. For example, an employee can sue an employer for unlawful workplace discrimination under federal anti-discrimination statutes, but an independent contractor may not. In addition, an employee may be entitled to certain employment benefits, while an independent contractor would not be. Finally, a company must withhold payroll taxes from an employee’s pay (and pay the employer’s portion of FICA), while an independent contractor is paid a gross amount, and is responsible for paying his/her own taxes.
So, how does a company know how to classify a worker? A worker’s job title is typically irrelevant, as is how many hours a worker works for the company. While the question of whether a worker is an employee or an independent contractor is an extremely fact-sensitive one, the United States Supreme Court has set forth thirteen factors to consider. This test requires examining (1) the hiring party’s right to control the manner and means by which the project is completed, (2) the skill required, (3) the source of the instrumentalities and tools, (4) the location of the work, (5) the duration of the relationship between the parties, (6) whether the hiring party has the right to assign additional projects to the worker, (7) the extent of the worker’s discretion over when and how long to work, (8) the method of payment, (9) the worker’s ability to hire and pay assistants and other workers, (10) whether the work is part of the regular business of the hiring party, (11) whether the hiring party is in business, (12) whether employee benefits are paid, and (13) the tax treatment of the worker.
No one factor is dispositive, and a court will look at the overall relationship of the parties. However, the overriding question is one of control – how much control the hiring party has over the worker.
If you have any questions as to whether one of your workers is an employee or an independent contractor, you should contact the Law Offices of David S. Feather as soon as possible. Classifying a worker correctly before that classification becomes a legal issue could save you aggravation, time, money and other resources.