Many states, in addition to the IRS, have adopted guidelines and definitions about independent contractors, but there is still confusion about what this means for employers. In the majority of locations, rules regarding independent contractors relate to what level of control the employer has over a product or service specifically related to whether the employer defines what is being done and how it will be done.
Other principles refer to independent contractor status in relation to how the person is paid. An individual who is on payroll and receives a regular check will be classified as an employee as opposed to an independent contractor.
In order to determine whether someone should be classified as an independent contractor, there are several other factors to consider, including:
- Whether the worker can be discharged from employment at any time
- Whether the worker can choose not to come to work without fear of losing his/her employment
- If the worker supplies the materials, tools, and equipment to do the job
- Whether the worker can control the hours of employment
- Whether the work conditions are temporary or permanent
Misclassifying a worker can have dire ramifications for a company in terms of legal disputes. An employee or worker who believes that he or she has not been classified correctly can file a legal claim regarding his or her rights. An employer who has questions about the best way to classify someone should get legal counsel first to determine whether the relationship appears to meet the guidelines to be classified as an employee or independent contractor. There are legal consequences with regard to defining this relationship in the wrong way, so the circumstances of the employment, the employee’s responsibilities, and other factors should all be evaluated carefully.