SLF LABOR AND EMPLOYMENT ALERT December 2006

Independent Contractor or Employee?

Employers who utilize the services of independent contractors must take steps to ensure that the contractors are truly independent. With changes in the way people work and an increase in the use of technology, the traditional employer-employee model is evolving. Proper use of independent contractors provides flexibility to employers and is often the type of relationship preferred by many workers.

However, simply labeling a worker an independent contractor when, in fact, the worker fits the definition of employee will not relieve employers from liability and can result in substantial penalties. One of the well-known tests applied by courts to determine whether a worker is truly an independent contractor considers the following:

The degree of control exercised by the alleged employer;

• The extent of the relative investments of the worker and the alleged employer;
• The degree to which the worker’s opportunity for profit and loss is determined by the alleged employer;
• The skill and initiative required in performing the job; and
• The permanency of the relationship.

None of the above factors, taken alone, is sufficient to establish an employer-employee relationship. Instead, all factors are considered together. Employers who use the services of independent contractors should analyze its relationship with its contractors against the above factors. The IRS publishes a fact sheet that describes these factors and other aspects of an independent contractor relationship (Publication 1779). The publication may be found online at www.irs.gov.

 

Labor Relations and
Employment Law
Robert J. Sniffen
rsniffen@sniffenlaw.com
211 East Call Street
Tallahassee, FL 32301
850.205.1996
850.205.3004 FAX