Independent Contractors vs. Employees

A worker’s classification can have significant impacts on both the worker’s rights under the law and in determining who is liable in the event that the worker is involved in wrongful conduct. There are a few tests that courts may use to distinguish between employees and independent contractors depending on the situation.  One such test is a ten-factor agency analysis. When utilizing this test, courts will consider each factor, with no single factor being conclusive.

First, courts look to the extent of control which, by agreement, the hiring party may exercise over the details of the work. An employee is generally someone who is employed to perform services for another and who is subject to the other’s control or right to control the physical conduct in such performance. Secondly, courts will consider whether or not the worker is engaged in a distinct occupation or business. If the worker performs the same type of work for multiple persons or companies, that weighs in favor of finding that the worker is an independent contractor.

Next, if the kind of occupation involved is usually done by a specialist without supervision, this factor weighs in favor of independent contractor status. The fourth factor looks specifically at the type of labor involved with the work. Unskilled labor is usually performed by employees, while skilled labor is more likely to be performed by independent contractors. Courts also ask who provides the tools that are necessary to complete the job. If the worker provides the necessary tools and instrumentalities, it points to independent contractor status. The sixth factor then looks to the length of employment, with regular hours and performance of continuous service over a considerable period of time being an indicator of employee status.

The type of payment is also a consideration in determining whether a worker is an employee or an independent contractor.  Payments in lump sum amounts for each job performed, as opposed to an hourly wage paid on a weekly basis, are more common among independent contractors than employees. The next factor examines whether the type of work being performed is part of the regular business of the employer. If the work is generally performed by the employer, this factor will weigh toward employee status. Courts will also consider what the parties believe their relationship to be as a factor. For example, a contract may plainly state that a worker is an independent contractor (although this factor would rarely outweigh the factors that touch on the actual working relationship between the parties). Finally, the courts will ask whether the principal is in business. If it is, this factor weighs in favor of employee status.

To review your company’s worker classification or review your current job classification,  call McNeelyLaw LLP at (317) 825-5110 to speak to one of our experienced employment law attorneys.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.