Helpful Checklist for Determining Whether A Person is an Independent Contractor or an Employee

I received an unsolicited (but not unwanted) email from the Baker Donelson law firm titled "20 Ways Your Independent Contractor Might Be an Employee."  The purpose of the email was to warn recipients about ongoing IRS employment tax audits in general and the worker classification issue (are workers employees or independent contractors) in particular. 

Well, I looked down the list of issues and it seemed like a pretty good checklist of areas of inquiry in a tort lawsuit to help establish that a so-called independent contractor was in fact an employee and thus the defendant should be vicariously liable for the negligent conduct of that worker.  It appears that Baker Donelson may have got the 20-factor checklist from a government publication or from prior cases on the subject but that is a little unclear. That being said, a hat tip to Baker Donelson for sharing this information.

Here are what Baker Donelson calls the "two threshold questions."

  • Does the hiring company pay its regular employees to perform essentially the same duties as the subject worker who is treated as an independent contractor?
  • Has that worker previously been paid by the company as an employee to perform essentially the same task?      

For a list of "twenty factors to determine whether the company hiring the worker actually has control over the worker" go to the jump.

 

 

1.     Instructions. A worker who is required to comply with another person's instructions regarding when, where and how to perform the work is ordinarily an employee.

2.     Training. Training a worker indicates that the company wants the services performed in a particular method or manner, which also indicates control.

3.     Integration. Integration of the worker's services into the company's core business operations generally shows that the worker is subject to direction and control.

4.     Services Rendered Personally. If the worker must personally perform services for the company, this will indicate control by the company. Alternatively, if the worker is free to engage others to perform the service for the company (i.e., subcontractors), a lack of control by the company is indicated.

5.     Hiring, Supervising and Paying Assistants. Similar to #4 above, if the worker is unable to hire, supervise and pay assistants to perform services for the company, control by the company is indicated. However, a lack of control is indicated when the worker is able to hire his or her own assistants and pay them from the worker's own funds.

6.     Continuing Relationship. A lengthy and continuing relationship between the worker and the company indicates that an employment relationship exists.

7.     Set Hours of Work. If the worker works certain hours set by the company, employment status is indicated. If the company does not control the hours of the worker, independent contractor status is indicated.

8.     Full Time Required. If the worker must devote substantially full time to the company's business, control is indicated.

9.     Work Performed on Employer's Premises. If the work is performed on the company's premises, the company is considered to have control over the worker, especially if the work could be done elsewhere. Control is also indicated when the company has the right to compel the worker to travel a designated route, to canvass a territory within a certain time, or to work at specific places as required.

10.   Order or Sequence Set. If a worker must perform services in the order or sequence as determined by the company, the worker is generally subject to an employer's control. However, if the worker chooses his or her own method for completing a job, a lack of control exists.

11.   Oral or Written Reports. A requirement that a worker submit regular or written reports is an indicator of control.

12.   Payment by Hour, Week, Month. Hourly, weekly or monthly payments generally point to an employment relationship. On the other hand, payments based on a contract or for completing a particular job or task will generally indicate an independent contractor relationship.

13.   Payment of Business and/or Traveling Expenses. If the company ordinarily pays the worker's business and traveling expenses, the worker is ordinarily an employee.

14.   Furnishing of Tools and Materials. If the company furnishes significant tools, materials and other equipment, an employment relationship is indicated.

15.   Significant Investment. If the worker does not invest in his or her own facilities, control is indicated because the worker depends on the company for such facilities.

16.   Realization of Profit or Loss. A worker who cannot realize a profit beyond an ordinary salary or suffer a loss is generally considered to be an employee.

17.   Working for More Than One Firm at a Time. If the worker cannot perform services for more than one company at a time, the company generally controls the worker. However, a lack of control is indicated when the worker is able to perform services for multiple companies at the same time.

18.   Making Service Available to General Public. If a worker is not free to advertise his or her services to the general public on a regular basis, control is indicated. Workers who advertise their services are generally considered independent contractors.

19.   Right to Discharge. The right of the company to discharge a worker without breaching a contract indicates an employment relationship as control is exercised through the threat of dismissal.

20.   Right to Terminate. If, at any time without incurring liability, the worker has the right to end his or her relationship with the company, an employment relationship is indicated.

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Comments (1) Read through and enter the discussion with the form at the end
Dan Hull - March 15, 2010 4:05 PM

Really useful. Thank you and BD.

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