How do you determine whether a worker is an independent contractor or an employee?
Minneapolis employment law attorney Marnie DeWall describes the factors that distinguish independent contractors from employees.
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The answer is of course it depends and it depends really on what forum you’re in. There are different governmental entities that look at different factors. For example, the IRS looks at certain factors, state taxing agencies may look at other factors, but generally they boil down to a few issues. Number one, what kind of behavioral control does the company have over the worker? In other words, how much are they directing what, how, and when the work is done? You also look at whether or not they have financial control over the worker. Are they paying the workers expenses, if so, that looks more like an employment relationship. If not, that looks more like an independent contracting relationship.
Other factors you may look at with respect to financial control are how the worker is paid. Typically, an employee would be paid a salary or a set amount on a weekly or monthly basis while an independent contractor might be paid per project. And then the third thing you look at is sort of the type of relationship that the worker has to the company. And specifically whether or not that worker is paid workers compensation benefits, unemployment insurance, may have employment benefits like medical insurance or dental insurance. If those kind of factors are present typically, that is going to look to an agency making the classification much more like an employee than an independent contractor.
Another thing to keep in mind at this point is that given the current government climate there is quite a bit of stepped up enforcement with respect to these classifications issues. So it is very important for a company to look closely and analyze whether or not someone really is an independent contractor or whether they really should be classified as an employee.