Am I An Independent Contractor or Employee?
An increasingly common question is whether a person working for a particular company is an employee or an independent contractor. While the answer to the question will always be dependent on each specific situation, in general, when the person works full-time and exclusively for a single company, the person is often an employee rather than an independent contractor.
Why is it important?
It is important to know if a person is actually an employee because an employee will be entitled to, among other things, minimum wages for all hours worked, overtime wages, rest periods, meal periods, and reimbursement for expenses. Employees may also be entitled to benefits with respect to workers’ compensation, unemployment, and disability insurance. Thus, an employee has far greater rights and protections than an independent contractor.
What is an independent contractor?
There is no exact definition of an independent contractor. Instead, Courts look at a number of different factors to determine whether a person qualifies as an independent contractor or employee. Very simply, an independent contractor is a person who works for a company on a project basis, and has freedom over how and when to perform work. For example, an insurance company might hire a contractor to design and install a computer network. The independent contractor would design the network (subject to the insurance company’s approval) and then build the network at his discretion consistent with his approved designs. Here, an independent contractor would perform the job, but would also be free to perform work for other companies as the person saw fit. In contrast, an employee would be a person who was required to work specified hours, was under the direction and control of the company at all times, and continued to work solely for the company.
Other factors considered by Courts include: (1) whether the person performing services is engaged in an occupation or business different from that of the employer; (2) whether the work is a part of the regular business of the alleged employer; (3) whether the employer or the worker supplies the tools and the place for the work; (4) the alleged employee’s investment in the equipment or materials required by the task; (5) whether the service rendered requires a special skill; (6) the kind of occupation; (7) the person’s opportunity for profit or loss depending on their 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; and (11) whether or not the parties believe they are creating an employer-employee relationship.