Elements
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Employee
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Independent Contractor
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Instructions |
A worker who is
required to comply with instructions about when, where, and
how to work is ordinarily an employee. The instructions may be
in the form of manuals or written procedures that show how the
desired result is to be accomplished. Some workers may perform
services without receiving instructions because they are
highly proficient and conscientious workers. Even if no
instructions are given, the control factor is present if the
employer has the right to give instructions. |
An
independent contractor decides how to do the job, establishes
his or her own procedures, and is not supervised. The entity
engaging his or her services is only interested in the end
result.
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Training |
Training of a
worker by an experienced employee working with him or her, by
correspondence, by required attendance at meetings, and by
other methods is a factor of control indicating that the
employer wants the services performed in a particular manner.
This is especially true if the training is given periodically
or at frequent intervals. |
An
independent contractor ordinarily uses his or her own methods
and receives no training from the principal. He or she is not
required to attend meetings.
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Integration |
If the worker’s
services are so integrated into an employer’s operations that
the success or continuation of the business depends on the
performance of the services, it generally indicates
employment. |
If the individual’s performance of
service and those of the assistants establish or affect his or
her own business reputation and not the business reputation of
those who purchase their services, it is an indication of an
independent contractor relationship. |
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Services Rendered
Personally |
If the services
must be rendered personally, it indicates the employer is
interested in the methods as well as the results. |
An individual’s right to substitute
another’s services without the principal’s knowledge suggests
the existence of an independent relationship. |
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Hiring Assistants |
A worker performs
services for an employer who hires, supervises, and pays
assistants. If a worker hires and supervises assistants at the
direction of the employer, he or she is acting as an employee
in the capacity of a foreman for or representative of the
employer. |
An
independent contractor hires, supervises, and pays assistants
under a contract that requires him or her to provide materials
and labor.
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Continuing Relationship |
The
existence of a continuing relationship between a worker and
the person for whom he or she performs services indicates an
employer - employee relationship. If the arrangement consists
of continuing or recurring work, the relationship is
considered permanent, even if the services are rendered on a
part - time basis, are seasonal in nature, or if the person
actually works for only a short time. |
The relationship between an
independent contractor and his or her client ends when the job
is finished.
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Set Hours of Work |
The establishment
of set hours of work by the employer is a factor of control.
If the nature of the occupation makes fixed hours impractical,
a requirement that the worker work at certain times is an
element of control. |
An
independent contractor is the master of his or her own time.
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Full – Time Work |
Full-time work
for the business is indicative of control by the employer
since it restricts the worker from doing other gainful work.
Full - time does not necessarily mean an eight-hour day or a
five-day week. Its meaning may vary with the intent of the
parties, the nature of the occupation, and the customs in the
locality. These conditions should be considered in defining
full – time. Full – time services may be required even though
not specified orally or in writing. |
An
independent contractor is free to work when he or she chooses
and to set his or her daily or weekly schedule. An independent
contractor would normally perform services less than full time
for
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Work Done on
Premises |
Doing the work on
the employer’s premises, on a route, or at a location
designated by an employer implies employer control, especially
where the work is of such a nature that it could be done
elsewhere. The use of desk space and of telephone and
stenographic services provided by an employer places the
worker within the employer’s direction and supervision unless
the worker has the option as to whether he or she wants to use
these facilities. However, the fact that work is done off the
premises does not indicate freedom from control since some
occupations (for example, construction workers) are
necessarily performed away from the premises of the employer.
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Doing work
away from the principal’s premises when it could be done on
the principal’s premises indicates a lack of control,
especially when the work is free from supervision.
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Order or Sequence
Set |
If a worker must
perform services in the order or sequence set by the employer,
it shows that the worker is not free to follow an independent
pattern of work but must follow the established routines and
schedules of the employer. Often, because of the nature of the
occupation, the employer either does not set the order of the
services or sets them infrequently. Control is sufficiently
shown, however, if the employer retains the right to do so.
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If the
principal is not interested in the order or sequence by which
the individual completes the work, there is an indication that
there is a lack of control over the manner and means by which
the work is performed.
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Reports |
The submission of
regular oral or written reports indicates control since the
worker must account for his or her actions. |
An independent contractor is not
required to file reports that constitute a review of his or
her work. (However, reports related only to an end result are
not an indication of employment or independence.) |
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Payments |
Payment by the
hour, week, or month generally represents an employer -
employee relationship The guarantee of a minimum salary or the
granting of a drawing account at stated intervals with no
requirement for repayment of the excess over earnings tends to
indicate the existence of an employer – employee relationship. |
Payment on a commission or job basis
is customary where the worker is an independent contractor.
Payment by the job includes a lump sum computed by the number
of hours required to do the job at a fixed rate per hour. |
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Expenses |
Payment of the
worker’s business and travel expenses by the employer
indicates control over the worker. |
A worker who is paid on a job basis
and who has to take care of all incidental expenses is
generally an independent contractor. Since the person is
accountable to no other person for the expenses, the person is
free to work according to his or her own methods and means. |
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Tools and
Materials |
The furnishing of
tools, materials, etc., by the employer indicates control over
the worker. In some occupations and industries, it is
customary for workers to provide their own tools, which are
usually small hand tools; in that case, workers may be
considered to be employees. |
When a worker furnishes tools and
materials, especially when a substantial sum is involved,
there is an indication of independence. |
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Investment |
The furnishing of
all necessary facilities by the employer tends to indicate an
employment relationship. Facilities generally include
equipment or premises necessary for the work, but not tools,
instruments, clothing, etc., that are commonly provided by
employees in their particular trade. |
A significant investment by the worker
in facilities used by him or her in performing services for
another tends to show independent contractor status. In order
to be significant, the investment must be real, essential and
adequate. |
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Profit or Loss |
When workers are
insulated from loss or are restricted in the amount of profit
they can gain, they are usually employees. The opportunity for
higher earnings, such as from pay on a piecework basis or the
possibility of gain or loss from a commission arrangement, is
not considered profit or loss. |
The
possibility of a profit or loss for the worker as a result of
his or her services generally shows independent contractor
status. Profit or loss implies the use of capital by the
worker in an independent business. Whether a profit is
realized or loss suffered generally depends on management
decisions; that is, the one responsible for a profit or loss
can use his or her own ingenuity, initiative, and judgment in
conducting the business or enterprise. Factors that affect
whether or not there is a profit or loss are whether the
worker:
• Hires, directs, and pays
assistants.
• Has his or
her own office equipment, materials, or other facilities for
doing the work.
• Has
continuing and recurring liabilities or obligations.
• Succeeds
or fails depending on the relation of his or her receipts to
his or her expenditures.
• Agrees to
perform specific jobs for prices agreed upon in advance.
• Pays
expenses incurred in connection with the work.
Independent
contractors typically can invest significant amounts of time
or capital in their work without any guarantee of success. |
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Works for More
Than One Person or Firm |
It is possible
that a person may work for a number of people or firms and
still be an employee of one or all of them because he or she
works under the control of each firm. |
Work for a number of persons or firms
at the same time usually indicates an independent contractor
status because the worker is usually free, in such cases, from
control by any of the firms. |
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Offers Services
to the General Public |
If a worker
performs services for only one person, does not advertise his
or her services to the general public, does not hold licenses
or hire assistants, and performs services on a continuing
basis, it is an indication of an employment relationship. |
The availability of services to the
general public usually indicates independent contractor
status. This may be evidenced by the worker having his or her
own office and assistants, hanging out a “shingle” in front of
his or her own home or office, holding business licenses,
maintaining business listings in telephone directories, or
advertising in newspapers, trade journals, magazines, etc. |
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Right to Fire |
If an employer
has the right to discharge an individual at will and without
liability, that worker is considered an employee. The employer
exercises the control through the ever present threat of
dismissal, which causes the worker to obey instructions. A
restriction on the employer’s right to discharge in a labor
union contract does not detract from the existence of an
employment relationship. |
An independent contractor cannot be
discharged as long as he or she produces a result that
measures up to his or her contract specifications. However,
the relationship can be terminated with liability. |
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Right to Quit |
The right to quit
at any time without incurring liability indicates an employer
/ employee relationship. |
An independent contractor usually
agrees to complete a specific job, and he or she is
responsible for its satisfactory completion or is legally
obligated to make good for failure to complete the job. |
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Custom in
Industry and Location |
If the work is
traditionally done by civil service employees under the
direction of a supervisor, it is an indication of employment. |
If the work is done by outside
specialists, it is an indication of independence. |
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Required Level of
Skill |
A low level of
technical skill is strong evidence of employment, since as the
skill level declines, there is less room to exercise the
discretion necessary for independence. |
A high level of technical skill is
important when combined with other factors such as owning a
separate and distinct business. |
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Belief of the
Parties |
It is an indication of employment
if:
• Both parties (the worker and the
State) believe the relationship is employment.
• Either
party believes that the relationship is employment. |
If the parties agree that the
relationship is one of independence, it may be. However,
consideration should be given to the fact that many
individuals do not know how employment determinations are made
and believe they are independent contractors because they are
independent contractors because they are told they are. |
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Business
Decisions |
Employees cannot
make business decisions that would enable them to earn a
profit or incur a financial loss. |
Independent contractors make business
decisions that enable them to earn a profit or incur a loss.
Investment of the worker’s time is not sufficient to show a
risk of loss. |