From the Work Market Blog — “Ultimately, determining how to classify and pay a worker depends on the business relationship that exists between you and the individual. Information that provides evidence on the degree of control and independence falls into three categories (via IRS.gov):
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
These three factors must be considered when determining whether a worker is an employee or an independent contractor. It’s important to note that there’s no silver bullet when making such a determination. Some factors may outweigh others and every situation is different.
The IRS is more likely to classify a worker as an independent contractor if they:
- earn a profit or suffer a loss from the activity
- are supplied the tools and equipment needed to perform the work
- are paid by the job
- work for more than one company at a time
- pay their own expenses
- set their own working hours.
Alternatively, the IRS is more likely to classify as an employee a worker who:
- can be terminated at any time
- is compensated by the hour
- receives instructions from the company
- receives training from the company
- works full time for the company
- receives unemployment benefits…”
Read the full story at W2 Employee or 1099 Independent Contractor? A Quick Primer
- What’s in a name: independent contractor v. employee – Lexology (registration) (lexology.com)
- Employee Or Not Employee? (womenstoolbox.com)
- DOL Refills States’ War Chests for Independent Contractor Misclassification Crackdown (employmentlawspotlight.com)