How Do I Know If I Have An Employee Or An Independent Contractor?

There is no set definition of the term “independent contractor” and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:

  1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal
  2. Whether or not the work is a part of the regular business of the principal or alleged employer
  3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work
  4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers
  5. Whether the service rendered requires a special skill
  6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision
  7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill
  8. The length of time for which the services are to be performed
  9. The degree of permanence of the working relationship
  10. The method of payment, whether by time or by the job