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Elements
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Employee
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Independent Contractor
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Instructions |
A worker who is required to comply with instructions
about when, where, and how to work is ordinarily an
employee. The instructions may be in the form of manuals
or written procedures that show how the desired result
is to be accomplished. Some workers may perform services
without receiving instructions because they are highly
proficient and conscientious workers. Even if no
instructions are given, the control factor is present if
the employer has the right to give instructions. |
An independent
contractor decides how to do the job, establishes his or
her own procedures, and is not supervised. The entity
engaging his or her services is only interested in the
end result.
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Training |
Training of a worker by an experienced employee working
with him or her, by correspondence, by required
attendance at meetings, and by other methods is a factor
of control indicating that the employer wants the
services performed in a particular manner. This is
especially true if the training is given periodically or
at frequent intervals. |
An independent
contractor ordinarily uses his or her own methods and
receives no training from the principal. He or she is
not required to attend meetings.
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Integration |
If the worker's services are so integrated into an
employer's operations that the success or continuation
of the business depends on the performance of the
services, it generally indicates employment.
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If the individual's performance of service and those of
the assistants establish or affect his or her own
business reputation and not the business reputation of
those who purchase their services, it is an indication
of an independent contractor relationship. |
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Services Rendered Personally |
If the services must be rendered personally, it
indicates the employer is interested in the methods as
well as the results. |
An individual's
right to substitute another's services without the
principal's knowledge suggests the existence of an
independent relationship. |
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Hiring Assistants |
A worker performs services for an employer who hires,
supervises, and pays assistants. If a worker hires and
supervises assistants at the direction of the employer,
he or she is acting as an employee in the capacity of a
foreman for or representative of the employer. |
An independent
contractor hires, supervises, and pays assistants under
a contract that requires him or her to provide materials
and labor.
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Continuing Relationship |
The existence of a continuing relationship between a
worker and the person for whom he or she performs
services indicates an employer - employee relationship.
If the arrangement consists of continuing or recurring
work, the relationship is considered permanent, even if
the services are rendered on a part - time basis, are
seasonal in nature, or if the person actually works for
only a short time. |
The relationship
between an independent contractor and his or her client
ends when the job is finished.
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Set Hours of Work |
The establishment of set hours of work by the employer
is a factor of control. If the nature of the occupation
makes fixed hours impractical, a requirement that the
worker work at certain times is an element of control. |
An independent
contractor is the master of his or her own time.
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Full - Time Work |
Full-time work for the business is indicative of control
by the employer since it restricts the worker from doing
other gainful work. Full - time does not necessarily
mean an eight-hour day or a five-day week. Its meaning
may vary with the intent of the parties, the nature of
the occupation, and the customs in the locality. These
conditions should be considered in defining full - time.
Full - time services may be required even though not
specified orally or in writing. |
An independent
contractor is free to work when he or she chooses and to
set his or her daily or weekly schedule. An independent
contractor would normally perform services less than
full time for
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Work Done on Premises |
Doing the work on the employer's premises, on a route,
or at a location designated by an employer implies
employer control, especially where the work is of such a
nature that it could be done elsewhere. The use of desk
space and of telephone and stenographic services
provided by an employer places the worker within the
employer's direction and supervision unless the worker
has the option as to whether he or she wants to use
these facilities. However, the fact that work is done
off the premises does not indicate freedom from control
since some occupations (for example, construction
workers) are necessarily performed away from the
premises of the employer. |
Doing work away
from the principal's premises when it could be done on
the principal's premises indicates a lack of control,
especially when the work is free from supervision.
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Order or Sequence Set |
If a worker must perform services in the order or
sequence set by the employer, it shows that the worker
is not free to follow an independent pattern of work but
must follow the established routines and schedules of
the employer. Often, because of the nature of the
occupation, the employer either does not set the order
of the services or sets them infrequently. Control is
sufficiently shown, however, if the employer retains the
right to do so. |
If the principal
is not interested in the order or sequence by which the
individual completes the work, there is an indication
that there is a lack of control over the manner and
means by which the work is performed.
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Reports |
The submission of regular oral or written reports
indicates control since the worker must account for his
or her actions. |
An independent
contractor is not required to file reports that
constitute a review of his or her work. (However,
reports related only to an end result are not an
indication of employment or independence.) |
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Payments |
Payment by the hour, week, or month generally represents
an employer - employee relationship The guarantee of a
minimum salary or the granting of a drawing account at
stated intervals with no requirement for repayment of
the excess over earnings tends to indicate the existence
of an employer - employee relationship. |
Payment on a
commission or job basis is customary where the worker is
an independent contractor. Payment by the job includes a
lump sum computed by the number of hours required to do
the job at a fixed rate per hour.
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Expenses |
Payment of the worker's business and travel expenses by
the employer indicates control over the worker. |
A worker who is
paid on a job basis and who has to take care of all
incidental expenses is generally an independent
contractor. Since the person is accountable to no other
person for the expenses, the person is free to work
according to his or her own methods and means. |
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Tools and Materials |
The furnishing of tools, materials, etc., by the
employer indicates control over the worker. In some
occupations and industries, it is customary for workers
to provide their own tools, which are usually small hand
tools; in that case, workers may be considered to be
employees. |
When a worker
furnishes tools and materials, especially when a
substantial sum is involved, there is an indication of
independence.
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Investment |
The furnishing of all necessary facilities by the
employer tends to indicate an employment relationship.
Facilities generally include equipment or premises
necessary for the work, but not tools, instruments,
clothing, etc., that are commonly provided by employees
in their particular trade. |
A significant
investment by the worker in facilities used by him or
her in performing services for another tends to show
independent contractor status. In order to be
significant, the investment must be real, essential and
adequate.
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Profit or Loss |
When workers are insulated from loss or are restricted
in the amount of profit they can gain, they are usually
employees. The opportunity for higher earnings, such as
from pay on a piecework basis or the possibility of gain
or loss from a commission arrangement, is not considered
profit or loss. |
The possibility of
a profit or loss for the worker as a result of his or
her services generally shows independent contractor
status. Profit or loss implies the use of capital by the
worker in an independent business. Whether a profit is
realized or loss suffered generally depends on
management decisions; that is, the one responsible for a
profit or loss can use his or her own ingenuity,
initiative, and judgment in conducting the business or
enterprise. Factors that affect whether or not there is
a profit or loss are whether the worker:
• Hires,
directs, and pays assistants.
• Has his or her
own office equipment, materials, or other facilities for
doing the work.
• Has continuing and recurring
liabilities or obligations.
• Succeeds or fails
depending on the relation of his or her receipts to his
or her expenditures.
• Agrees to perform specific
jobs for prices agreed upon in advance.
• Pays
expenses incurred in connection with the work
Independent contractors typically can invest significant
amounts of time or capital in their work without any
guarantee of success. |
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Works for More Than One Person or Firm |
It is possible that a person may work for a number of
people or firms and still be an employee of one or all
of them because he or she works under the control of
each firm.
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Work for a number
of persons or firms at the same time usually indicates
an independent contractor status because the worker is
usually free, in such cases, from control by any of the
firms.
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Offers Services to the General Public |
If a worker performs services for only one person, does
not advertise his or her services to the general public,
does not hold licenses or hire assistants, and performs
services on a continuing basis, it is an indication of
an employment relationship. |
The availability
of services to the general public usually indicates
independent contractor status. This may be evidenced by
the worker having his or her own office and assistants,
hanging out a "shingle" in front of his or her own home
or office, holding business licenses, maintaining
business listings in telephone directories, or
advertising in newspapers, trade journals, magazines,
etc. |
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Right to Fire |
If an employer has the right to discharge an individual
at will and without liability, that worker is considered
an employee. The employer exercises the control through
the ever present threat of dismissal, which causes the
worker to obey instructions. A restriction on the
employer's right to discharge in a labor union contract
does not detract from the existence of an employment
relationship. |
An independent
contractor cannot be discharged as long as he or she
produces a result that measures up to his or her
contract specifications. However, the relationship can
be terminated with liability.
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Right to Quit |
The right to quit at any time without incurring
liability indicates an employer / employee relationship. |
An independent
contractor usually agrees to complete a specific job,
and he or she is responsible for its satisfactory
completion or is legally obligated to make good for
failure to complete the job. |
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Custom in Industry and Location |
If the work is traditionally done by civil service
employees under the direction of a supervisor, it is an
indication of employment. |
If the work is
done by outside specialists, it is an indication of
independence. |
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Required Level of Skill |
A low level of technical skill is strong evidence of
employment, since as the skill level declines, there is
less room to exercise the discretion necessary for
independence. |
A high level of
technical skill is important when combined with other
factors such as owning a separate and distinct business. |
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Belief of the Parties |
It is an indication of employment if:
• Both
parties (the worker and the State) believe the
relationship is employment.
• Either party
believes that the relationship is employment. |
If the parties
agree that the relationship is one of independence, it
may be. However, consideration should be given to the
fact that many individuals do not know how employment
determinations are made and believe they are independent
contractors because they are independent contractors
because they are told they are.
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Business Decisions |
Employees cannot make business decisions that would
enable them to earn a profit or incur a financial loss. |
Independent
contractors make business decisions that enable them to
earn a profit or incur a loss. Investment of the
worker's time is not sufficient to show a risk of loss. |
