Determining Whether You Are an Independent Contractor or an Employee

Just because you have a contract that refers to you as an "independent contractor" does not mean that you actually are an independent contractor. The actual relationship that you have with your employer must be analyzed to determine whether you are an employee or an independent contractor.

There are many factors to consider to determine whether you are an independent contractor or employee. The most important factor is your employer's right to control the manner and means by which your work product is accomplished. If you control how you produce your work product then you are more likely an independent contractor. If your employer controls how you produce your work product then you are more likely an employee.Employers oftentimes improperly classify their employees as independent contractors so that they, the employer, do not have to pay payroll taxes, the minimum wage or overtime, comply with other wage and hour law requirements such as providing meal periods and rest breaks, or reimburse their workers for business expenses incurred in performing their jobs. Additionally, employers do not have to cover independent contractors under workers' compensation insurance, and are not liable for payments under unemployment insurance, disability insurance, or social security.

Just because you have a contract that refers to you as an "independent contractor" does not mean that you actually are an independent contractor. The actual relationship that you have with your employer must be analyzed to determine whether you are an employee or an independent contractor.

There are many factors to consider to determine whether you are an independent contractor or employee. The most important factor is your employer's right to control the manner and means by which your work product is accomplished. If you control how you produce your work product then you are more likely an independent contractor. If your employer controls how you produce your work product then you are more likely an employee.

Other factors to be considered:
- the amount of skill required to do the work;
- who owns the tools needed to do the work;
- whether you are working at your own office or at your employer's office;
- how long you have been working for your employer;
- whether your employer has the right to assign additional projects to you;
- the extent of your employer's discretion over when and how long you work;
- how your employer pays you;
- if your employer hires and pays your assistants;
- whether your employer gives you benefits;
- how your employer treats you with regard to taxes;
- how the work relationship may be terminated; and
- whether you receive vacation time.

Partners are not employees, but you must truly be a partner. Factors to consider to determine if you are actually a partner include:
- whether you share of financial risks or benefits;
- whether you are personally liable for partnership liabilities;
- whether you are investing in the business;
- whether you have voting rights in the business;
- whether you have the right to fire or hire employees; and
- whether you have the ability to exercise control over the business.

The potential liabilities and penalties are significant if you are treated as an independent contractor and later found to be an employee. If you feel that you improperly classified as an independent contractor, contact us for help in dealing with your situation confidentially.