Whether a worker is an Independent Contractor or must be put on payroll as an employee is a question of facts and circumstances. The primary issue is whether the employer has the right to “direct and control the exact duties and manner in which a worker carries out those duties.” There is no specific law defining a worker’s status, but over the years the IRS has produced a guideline that amounts to a 20 point checklist.
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No one point in the test is governing, but some are clearly more important than others. As the test is applied, multiple “yes” answers point toward an employer/employee relationship.
- Does the employer provide instructions about when, where, and how to do the job?
- Does the employer provide training for the worker?
- Does the worker get started with little or no investment?
- Does the company reimburse the worker’s travel or other expenses?
- Is this the worker’s only client?
- Is the worker paid by the hour, week, or month?
- Is the worker insulated from profit and/or loss from his/her services?
- Can the employer terminate the worker?
- May the worker quit work at any time without incurring liability?
- Does the worker have a continuing working relationship with the employer?
- Are the worker’s services integrated with and/or significant to the business?
- Must the services be rendered by the worker personally?
- Does the employer either provide or supervise the worker’s assistants?
- Is the work performed in a sequence set by the employer?
- Is the worker required to submit regular oral or written reports to the employer?
- Does the worker rely on the employer to furnish supplies, tools, and materials?
- Does the worker perform for only one employer at a time?
- Is the worker required to work a set number of hours?
- Does the worker work 40 hours or more per week for the employer?
- Is the work done on the employer’s premises or at a location designated by the employer?
Use these questions to determine if you have an independent contractor or an employee.