What is an independent contractor?

Minneapolis employment law attorney Greg Stenmoe defines an independent contractor.

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An independent contractor is different from an employee. An employee is typically somebody that you hire to come to work at your business, you pay them an hourly wage, and they do a task for you that you set out for them. An independent contractor is significantly different in that an independent contractor can work for more than one company or entity, they can determine the means and method of performing the job, and they have some risk of profit or loss as a result of the endeavor.

I’ll give you an example. If I hire you to paint my house, and I tell you, “Come paint my house. I’ll pay you $5,000.00, just paint it red.” That’s an independent contractor. You’ve told them, here’s your job that I want you to do. The end result is, I want my house red, and I’ll pay you $5,000.00 whether it takes you ten minutes or ten weeks to get it done, so that the painter has some risk of loss. If they’re very efficient they can make a lot of money, if they’re not efficient, they’re going to lose money, and they kind of decide how you’re going to do the project.

If I hire you to paint, not just my house, but every house in a development, and I tell you, “Okay, I want you to paint these houses. I’m going to tell you what color to paint them, I’m going to supply you with the paint and the materials to do it, and I’m going to pay you on an hourly basis.” That would an employee. And in between would be, well, I will hire you to paint my house and maybe a few other people and maybe we’ll work out the details on how you get paid. That’s a gray area.