As the use of parties identified as independent contractors is growing, so too the issue of independent contractor vs. employee status is arising more frequently. Several state regulatory agencies are deeply interested and have a stake in this classification.
Many unwittingly conclude that there is independent contractor status based solely on the following considerations:
- Both parties signed an agreement
- The desire to be a contractor, rather than employee
- Paid commission only
- No supervision
- The contractor does assignments for more than one company
These are relevant factors but are not necessarily the whole story. And problems sometimes arise after an injury leading to worker’s compensation claim or in the event of an unemployment claim and even a wage and hour claim.
Supplementary factors come into play to help with the determination. For example, does the contractor:
- Operate under its own business name?
- Have separate employees?
- Separate accounting?
- Invoice more than one client, own its tools and set its own hours?
Some preventive strategies focused on establishing true independence between the parties are also discussed. In many instances, which party ultimately controls the work product proves to be a key consideration, but penalties can be severe for an incorrect assessment by the parties.