To determine if you are an independent contractor or not, there are a lot of questions you must be willing to ask yourself about your job. However, it is also important to understand exactly what an independent contractor is. The IRS itself has adopted many common law principles to help define an individual as an independent contractor. They focus mostly on the level of control that an employer has over a service or product. When identifying yourself, you must ask several questions such as: Do you supply your own equipment? Are necessary materials not provided by the employer? Can you be discharged at any time and choose whether or not to come to work without fear of losing employment? Do you control the hours of work? Is your work temporary or permanent?
The Fair Labor Standards Act makes a lot of these decisions, too, and can answer some of your specific questions. Some courts and federal agencies will come up with something known as an “economic realities test.” This looks at the overall dependence of a worker and whether or not they gain a large portion of their salary from the business. If they do, chances are they will qualify as an employee. A new set of questions arises, including: What is the degree of control over work and who exercises said control? Who has paid for all necessary materials? What type of skill is required for work? Is the worker an integral part of the business?
California’s Test for Employment
California has adopted their own test and secondary factors to determine whether or not someone is actually an employee. They believe that the right of direction and control is the most important factor in determining an employment relationship. Some things that a worker in California has to ask themselves is if the work they do is done without supervision or not. Is the work highly skilled and specialized, and the worker is trained by this principal? As far as payment is concerned, is the worker paid based on time worked or on completion of the project?
Here is a rundown of how the IRS works in making a determination. There are three key factors involved:
- Behavioral Control: Anyone who is willing to perform services for your company is an employee if you have the right to control what is done and how it will be done.
- Financial Control: Independent contractors are in business for themselves. They are offering their work for the public and have a financial investment in the facilities used to perform these services.
- Relationship of the Parties: How do you and the worker perceive your relationship? A permanent relationship may indicate an employer-employee relationship.
What Else Do I need to Know?
There are other points to remember as well. According to Cal. App. 3d 864, 877 code, the existence of a written agreement for an employee or independent contractor is not determinative in whether or not they actually are. It is also stated that, even if a worker is issued a 1099 form rather than a W-2, this is not a determining factor either. You will have to keep all of these things in mind if you want to establish yourself as one or the other.
If you want to make the determination of if you are an independent contractor, there are many questions you may need to ask yourself. You may also need to consult with the IRS and come up with some answers about your employee relationship. Whatever the matter, you may have rights. This means that, if you suspect you need the aid of an attorney in a case (sometimes revolving around workers’ compensation and wondering if you can benefit) you may want to speak to one immediately. Call WTW for a case consultation.