To Be, Or Not To Be An Independent Contractor—That Is The Question

From Mondaq — John W. Hargrove writes:  “Whether a worker is an employee or an independent contractor is critical in many different situations:

  1. What if he kills someone?
  2. What if he kills himself?
  3. What if he burns your building down?
  4. What if he brings a class action employment case against you?
  5. What if the IRS wants to see his payroll records?

Having correctly categorized a worker in anticipation of these possible scenarios can have a huge impact on any company.

Before I discuss the various tests and initiatives now taking place, I want to make two points. First, if your worker does not have an employer—a separate contractor or perhaps a staffing company—then you automatically are in the danger zone. Certainly sole proprietorships are legal, but they can be dangerous for a company using them, especially if the sole proprietorship is not set up correctly—something you might not even know. For example, does the sole proprietorship have any kind of insurance? Second, these individual contractors are much smaller than your company. So, if something goes wrong, your company is going to be a target no matter how you think the law is about independent contractors.

Now that I have mentioned the dangers, I will mention the tests that are used to determine independent contractor status. There are several, which is not surprising since the issue comes up in so many different contexts. One of the most well known is the “common law test,” or the traditional 20-factor test once used by the IRS. The IRS’s revised 20-factor test now features factors organized into three categories….”

Read the full story at To Be, Or Not To Be An Independent Contractor—That Is The Question.

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