Independent Contractors

Independent contractors perform compensated work for businesses and individuals, but they are not considered to be employees. These non-employment relationships are based on an oral or written arrangement between the business and the contractor. If written, this contract may provide specific standards for the work in question and establish the pay rate for that work. Businesses who hire contractors do not withhold federal or state income taxes or social security from independent contractor payments, and they do not have unemployment or workers' compensation expenses for those workers. Independent contractors have more freedom over their work and the ability to contract with a range of businesses, but they do not receive many of the legal protections that employees do. If you are a business or a worker involved in or considering an independent contractor arrangement, you should learn all the legal consequences for both sides. Contact an experienced employment law attorney to discuss your situation.

Rights & Duties of Independent Contractors

As an independent contractor, companies are not your employers, they are your customers. Independent contractors have the right to decide when, where, and how the project should be completed. If you are an independent contractor, the businesses hiring you are not entitled to direct your work. Generally speaking, your customer specifies the desired outcome of your work, and you have the freedom to determine how to achieve that outcome.

While clients cannot directly oversee the work, that does not mean that independent contractors have free rein on all aspects of the relationship. Independent contractors must complete their assigned projects on time and according to the specifications set forth in the independent contractor agreement. Also, since companies don't withhold taxes for independent contractors, independent contractors have a duty to pay their own taxes each quarter.

Defining the Independent Contractor

Under federal law, a worker is either an employee or an independent contractor. The determination is measured by the degree of control the employer has over the independent contractor versus the degree of independence the independent contractor has from the employer.

The United States Supreme Court has determined there is no single rule of test for determining whether individuals are employees or independent contractors. Rather, the determination is made by reviewing the relationship as a whole. Among the factors the Court has considered important are:

1. The extent to which the services rendered form an integral part of a business.
2. The permanency of the business relationship.
3. The amount of the worker's investment in equipment or materials.
4. The nature and degree of control by each party.
5. The worker's opportunities for profit and loss.
6. The degree of independent business organization or operation.
7. The amount of initiative, creativity and foresight required for the worker to succeed against others in open market competition.

Certain factors are irrelevant in determining whether and independent contractor relationship exists. Factors such as the absence of a formal independent contractor agreement, the time or method of payment, or the worker's licensure by the state or local government are not typical determining elements.

Conclusion

In order to determine whether an individual is an employee or an independent contractor, the relationship or the worker and the business must be examined. The degree of control the employer has over the independent contractor should be balanced against the degree of independence the individual has from the employer. All factors related to control and independence must be considered. Independent contractors are not considered to be employees of the employer, and the relationship between the parties is governed by the independent contractor agreement entered into by both parties. If you have questions as to whether you are or you are employing an independent contractor or an employee, contact an experienced employment law attorney to ensure that your rights are protected.

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