DO YOU KNOW WHEN TO
CONSIDER A WORKER AN
INDEPENDENT CONTRACTOR?
Don’t fall into an Employer Liability Trap
If you have a business and pay other people to do work for you, or on behalf of your business, you may be surprised with an UNANTICIPATED LIABILITY if a worker you consider to be an independent contractor files a claim for Unemployment or Disability Insurance.
Workers providing services to, or on behalf of your business, may be your employees for employment purposes, even though you believe they are independent contractors.
Chances of liability are greater if you pay for such services by the hour, by the JOB, or a specific time period; if the services are performed for your business on a regular basis; or, if the workers do not hold themselves out to the public as being in business and generally provide their services to a wide range of other customers. The test for liability is:
Whether the business owner, either directly or through agents (or even customers) has the right or the ability to supervise or otherwise control the time, place and manner in which workers carry out their jobs. Unless the proprietor clearly “does not” have the right to supervise and control the workers, either directly or indirectly, an employment relationship probably exists and employment taxes and employee JOB RELATED injury insurance may be required.
DANGER
There are many additional situations in which employment exists as a result of state laws, even though a common law relationship may be one of principal or as an independent contractor. Examples are: unlicensed construction subcontractors, route salespersons or commission agents and drivers. This is not a complete list; there are numerous other examples in state laws.
The Common Law Test For Employment
Does the business owner/primary contractor, or does the worker, have the right to control the manner and means by which the work is done?
If one or more of the following conditions exist, there may be an employer/employee relationship:
· The principal contractor (proprietor) has the right to discharge the worker or company (subcontractor) at will without cause and liability.
· The work is not skilled and specialized.
· The worker does not provide the tools, equipment and place of work.
· The services are provided on a repetitive or long-term basis.
· The worker is paid based on the time worked, piece rate, or contracted JOB.
· The work is not separate from the regular work, business or other services provided by the principal contractor.
· There is no written contract showing the intent of the parties to create an independent relationship.
· The nature of the work is such that the worker and/or subcontractor has little or no meaningful discretion over how to do the job, when to do the job, or where to do the job.
These conditions are based on the determining factors articulated by the Supreme Court and by the regulations of the Department implementing these factors. The above sample questions do not, substitute, supersede or amend any state regulations. They only point out in simple direct language the issues raised by state regulations.
BACK F. Darrell Lindsey
U.S. Licensed Agent/Producer