How do I determine if I have an employee or an independent contractor?

Any kind of long-term, ongoing work arrangement is likely an employment relationship. However, there are three essential elements to making a definitive determination of work status: behavioral control, financial control, and the type of relationship.

Behavioral control includes instructions, evaluation, and training. When you control these, it’s likely an employer-employee relationship.

When it comes to financial control, the extent of the worker’s investment must be determined. The larger the worker’s personal investment, the more likely it is that he or she is an independent contractor. Other factors to consider include how business expenses are reimbursed, how the worker is paid, whether the worker can realize a profit or loss, and the extent to which the worker makes his or her services available to other businesses. The bottom line: if the employer assumes most of the risk, the worker is paid regularly (rather than by project), and the worker doesn’t solicit business from other organizations, then the worker is likely an employee.

The type of relationship is determined by several questions: whether there is a written contract (although a contract does not necessarily overrule other factors), if benefits are provided, if the relationship is permanent or time-bound, and whether the worker’s duties are a key part of the regular business of the company. When a recurring or ongoing project is not a part of the regular business (for example, mowing the lawn of a dentist’s office), then the relationship may qualify as an independent contractor relationship.

For more information, or if you have questions about your specific scenario, please contact us.
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