If you just landed a job, you may not care how exactly your employment status is classified. You should care, however. Whether you are classified as an “independent contractor” or an employee makes a big difference in a lot of aspects of the job, including pay, benefits, taxes, and more.

What is an Independent Contractor?

Legally, an independent contractor is a worker who is not an employee. Since an independent contractor is not an employee, he or she is not subject to many of the rules that employees are subject to. In some cases, it can be difficult to tell whether a worker is an independent contractor or an employee.

There are some tests that common law, case law, statutes, and the IRS use to determine whether a worker is an independent contractor or an employee including:

 

  • Whether the worker receives a steady paycheck (probably an employee) versus receives pay for hours worked on an irregular schedule (probably an independent contractor)
  • Whether the worker supplies his or her own tools, material and equipment. If the worker does, he or she is more likely to be an independent contractor.
  • Whether the worker sets the schedule or the employer sets the schedule. If the worker sets the schedule, he or she is more likely to be an independent contractor, versus an employee who is probably told which hours to work.
  • Whether the work is temporary or permanent. If the work is permanent, the worker is more likely to be considered an employee.
  • If the worker can be discharged anytime, and can choose whether or not to come to work without fear of losing the job, the person is more likely to be in independent contractor.
  • If the worker depends on the business for a large portion of his or her salary, the person more likely qualifies as an employee rather than an independent contractor.
  • If the company controls the way the work is done, the worker is more likely to be an employee rather than an independent contractor.

It’s very important to determine whether a worker is an independent contractor or an employee for many reasons. One of the biggest reasons is for tax purposes. An employee’s and an employer’s tax liability are determined by the worker’s employment status. If a worker is an employee, the employer must pay social security tax, federal and state unemployment tax, as well as premiums for workers’ compensation in the event the employee gets injured. If a worker is an independent contractor, he or she is responsible for the social security taxes. In addition, employees normally receive paychecks with the taxes withheld and paid to the state and federal taxing authorities, whereas independent contractors receive the entire amount they earn, and are responsible for making payments to state and federal taxing authorities.

Differences Between Independent Contractors and Employees

There are also benefits that employees receive that independent contractors do not. If an employee is laid off, he or she may get unemployment compensation, which is not available to independent contractors. Employees may receive paid time off and benefits like health insurance, which independent contractors do not receive. Employees can typically receive overtime pay for excess hours worked, which independent contractors do not receive.

There are numerous benefits to workers of being an employee versus an independent contractor. However, it’s normally more financially beneficial for employers to classify workers as independent contractors. If you believe that you are improperly being classified as an independent contractor by your employer, you may have legal rights against your employer.

Contact an Employment Rights Attorney

At Liberty Law, Micha Star Liberty believes that employers should not try to skirt the law by improperly classifying their employees. If you believe that you are really an employee, but you are being called an independent contractor, call Micha Star Liberty, Oakland employment attorney, at 510-645-1000 or 415-896-1000.



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