Employees vs. Independent Contractors
You are working for somebody in exchange for a certain amount of money. But are you an "employee"? Or are you an "independent contractor"?
Why does it matter, to begin with?
Employees are often subject to state labor laws that provide certain benefits to workers such as overtime, minimum wages, meal and rest breaks, reimbursements for business expenses, unemployment insurance, etc. Independent contractors are not automatically entitled to such benefits.
How do you tell if you are an employee as opposed to an independent contractor? There is no simple answer, and its usually determined by a number of different criteria. However, there are two initial rules to keep in mind upfront:
1. If you are working for someone, the initial presumption is that you will be considered to be an employee, unless it is affirmatively proven that you qualify as an independent contractor.
2. It ultimately doesn't matter if an employer labels you an "independent contractor". You may still be an employee, even if you are labeled differently from the person or company who pays you. The test for determining if you are an independent contractor or not is based on a set of objective criteria beyond what you have been labeled. If a person or company who hires you believes you to be an independent contractor, that may be one relevant factor in determining your true status - but it is definitely not the overriding element.
The standards for determining a worker's status can vary somewhat from state to state. However, the key factor is a common law test which states that if the person for whom you work for has the right to direct and control how your work is done (including specifically when, where, and how the work is to be performed), then you will be considered an "employee" - not an independent contractor.
Other factors may include those such as:
- Whether you are engaged in an occupation or business distinct from that of the person or company hiring you;
- Whether or not the work you do is a part of the regular business of the person or company hiring you;
- Whether the person or company hiring you supplies you with the instruments, tools, and workspace for you to perform the work;
- If you have personally invested in the equipment or materials required to complete your work task;
- The amount of time you perform your work services;
- If there is a specific set time each day that you are directed to perform the work;
- The degree of permanence of the working relationship;
- The method of payment - Are you being paid by the amount of time you work? Or based on your completion of a specific task?
- Whether the services you render require a special skill;
- Whether the work is usually performed under the direction of the person or company who hires you, or by a specialist without supervision;
- Whether the amount of money or profit you earn is dependent on your managerial skills.
Some or all of these factors may be considered together to determine if you are acting as an employee or independent contractor in terms of the big picture. Some companies may hire employees, but try to get them falsely labeled "independent contractors" in order to avoid paying overtime or other benefits to which workers may be entitled to.
If you aren't sure of your employment status and feel the need to determine it to prevent you from being mislabeled, consider contacting an attorney who specializes in employment matters.
Top Employees Rights Attorneys in the USA.
[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, nor any of its affiliates, shall have any liability stemming from this article.]
