To Be or Not to Be an Independent Contractor
A frequent question arises regarding when an employee is an independent contractor and when is he just a regular employee. Many employers have moved to using independent contractors instead of employees. The status of independent contractor can save the employer significant amounts of money in employment taxes, social security payments, etc.
But, the IRS understands that employers have an incentive to stretch the truth regarding an employee's status. Department of Labor understands this and the courts understand this. So, every entity has some test to determine whether an employee is truly independent. Kevin Christensen has written a nice summary of the different tests to determine whether an employee might be considered an independent contractor at his California Employment Blog. You can also look at a helpful summary provided by the DOL.
Among the most important factors is 1) the degree and nature of control of the work by the.jpg)
supervisor. If the supervisor simply asks that a wall outlet be installed, then that employee performing the work may be a true independent contractor. But, if the same supervisor instructs the employee to use 220 gauge Romex, specifies where and how to tie into existing wiring and provides the Romex wire and tools, then that so-called independent contractor may actually be an employee.
Another important factor is 2) how integral is the work to the business. If the business is a bakery, then it seems unlikely they would also be in the business of installing new wall outlets.
Another important factor is 3) the extent to which the employer provides the equipment and materials of the purported independent contractor. If a stationery supplier hires truck drivers via a third party, but provides the truck, then it is less likely that the third party is the true employer. That is, if a) ABC Stationery Supplies provides the truck, b) XYZ Trucking Co. claims to be the true employer but does nothing other than issue a pay check, then it appears that the truck driver is actually employed by ABC Stationery. As the DOL notes, context is everything. These tests depend a great deal on individual facts.
Perhaps the least relevant factor is how is the alleged employee paid. Obviously, a true independent contractor would be paid by the project, not by the hour.
The independent contractor distinction is very important. if an employer mis-classifies an employee as an independent contractor, then that employer could become liable for unpaid overtime for a time period of years.
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housed the mentally disabled men in a dilapidated bunkhouse - which was eventually closed by the Fire Marshall. 