Thursday, March 11, 2010

Playing 20 questions with the employee versus contractor distinction


As reported by the Washington DC Employment Law Update, the Treasury Department and Department of Labor have been jointly charged to eliminate legal incentives for employers to misclassify employees as independent contractors, and investigate potential misclassifications. Misclassifications carry potentially severe penalties. For example, employees are subject to wage and hour laws, and must have payroll taxes paid on their behalf. Contractors, on the other hand, do not have to paid minimum wage or overtime, and can be 1099’ed.

How do you know if you are misclassifying employees as contractors? Consider these 20 questions, none of which are dispositive, but each of which is an important part of the calculus. The more yes answers you have, the more likely the worker is an employee.

  1. twentyqIs the worker required to comply with others’ instructions about when, where, and how to perform the work?

  2. Is training part of the work experience?

  3. Are the worker’s services Integrated into the business operations?

  4. Do the services have to be rendered by the specific worker charged with the task?

  5. Does the person or entity for whom the services are performed hire, supervise, and pay assistants?

  6. Is there a continuing relationship between the worker and the person or entity for whom the services are performed?

  7. Is the work on a full-time basis?

  8. Is a regular and consistent schedule required?

  9. Is the work performed on the premises of the person or entity for whom the services are performed?

  10. Does the worker have to perform services in the order or sequence set by the person or entity for whom the services are performed?

  11. Is the worker required to submit regular or written reports to the person or entity for whom the services are performed?

  12. Is the worker paid on a set schedule, whether by the hour, week, or month?

  13. Does the person or entity for whom the services are performed ordinarily pay the worker’s business and/or traveling expenses?

  14. Does the person or entity for whom the services are performed furnish tools, materials, and other equipment?

  15. Does the worker rely upon the person or entity for whom the services are performed to provide facilities for the work?

  16. Is the worker’s base compensation unrelated to his or her performance or the performance of the enterprise?

  17. Does the worker only provide services to one person or entity at a time?

  18. Does the worker refrain from making his or her services available to the general public on a regular and consistent basis?

  19. Does the person or entity for whom the services are performed retain the right to discharge a worker?

  20. Does the worker retain the right to end his or her relationship with the person or entity for whom the services are performed at any time without incurring liability?


Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Latest Posts