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Am I an Employee or Independent Contractor? (Article)

Authored By: Lagniappe Law Lab

Am I an Employee or Independent Contractor?

 

The answer to this question is very different for each person and is highly dependent on the unique facts of the work you do and the relationship you have with those you work for.  The key to an employee-employer relationship is the employer’s right to control an employee’s work, so the factors that are considered focus on that control.  If an employer has the right to control the work, it is likely a traditional employee/employer relationship.  On the other hand, if the worker has more control, he or she is more likely to be considered an independent contractor.  

 

Below is a list of the factors that are usually considered when deciding if someone is an independent contractor or employee.  No factor is more important than another, meaning that you are not classified as an employee or an independent contractor just because your work situation fits in one of the examples.  You must consider all of the facts and decide if more control rests with the employer or the worker.  After each factor, an example is provided of how the factor applies to a fictional worker who hauls supplies to worksites.  This is just an example to help you understand how the factor could apply and is not a representation that, if you fit that characteristic, you are definitively an employee or contractor. 

 

 

Employee

Independent Contractor

Selection and Engagement of Worker

Employees are usually hired to work on an ongoing basis. 

 

Example:  ABC Company hires a Jim to haul materials to ABC Company worksites on a regular basis, with no planned end-date. 

Independent contractors are often hired to work on a temporary basis, or on specific projects with a defined start and end.

 

Example:  ABC Company engages Jim to haul five loads to worksites in the month of June.  

 

Employees usually work exclusively with a single business.  

 

Example:  ABC Company hires Jim to haul materials to ABC Company worksites.

Independent Contractors might work for multiple businesses at a time. 

 

Example:  Depending on the day, Jim hauls materials for ABC Company, XYZ, Company, and LMN Company.  

Payment of Wages & Benefits

Employees usually receive a salary or a fixed hourly rate.

 

Example:  ABC Company pays Jim $15.00/hour for his work. 

Independent contractors are often paid per completion of a particular project, or on commission.

 

Example:  ABC Company pays Jim $150.00 for each load that he accepts and completes. 

 

 

Employees usually have taxes taken out of their pay.

 

Example:  Jim’s bi-weekly paychecks have taxes subtracted from them.

Independent contractors usually do not have taxes taken out of their pay.

 

Example:  ABC Company pays Jim in cash without taking out taxes as each job is completed. 

 

Employees often receive employer-provided benefits like health insurance or the ability to participate in a retirement plan.

 

Example:  ABC Company offers a group health insurance plan that Jim can join. 

Independent contractors usually do not receive employer-provided benefits like health insurance or the ability to participate in a retirement plan.

 

Example:  Jim does not receive any benefits in connection with his work. 

Power of Dismissal

Employees can usually be terminated at will. 

Example:  Jim does not come to work when scheduled for three days in a row and ABC Company fires him. 

 

An independent contractor is usually not terminated once a job has been agreed upon. 

Example: Even though Jim usually comes to ABC every Tuesday to see if there are any loads for him to haul, there is no agreement that he has to do so, and he doesn’t come at all in June.  ABC Company doesn’t and likely can’t take any actions to punish him (other than the fact that ABC can simply decide to stop using him to haul future loads).

 

Power of Control

In an employer-employee relationship, the employer usually has control over an employee’s hours/days of work.

Example:  ABC schedules Jim to work Monday through Friday from 6 AM to 2 PM.  He must come to work for all scheduled hours, regardless of if there are loads to haul.

 

 

Independent contractors often have more flexibility to determine when their work is completed. 

Example:  ABC engages Jim to haul at least 5 loads a week for ABC, and Jim completes all 5 loads on Monday and Tuesday in the first week, but does one a day during the second week. 

 

 

An employee is usually provided with the tools and supplies required to do the job.

Example:  ABC provides Jim with a company-insured truck to haul loads.   

Independent contractors often use their own tools and supplies to do the job.

Example:  Jim uses his own truck (that he insures) to perform his work.   

 

An employee typically has a supervisor who decides the specifics of the work to be done.

Example:  Jim’s supervisor at ABC tells him the time of day and route to take when hauling loads.   

 

Independent contractors often have more freedom to determine how their work is completed with minimal supervision. 

Example:  Jim can come at any time to pick up materials and take them to the designated worksite, so long as he completes the task.    

 

Last Review and Update: Aug 05, 2020