As a business you have the choice to hire independent contractors. Independent contractors are individuals that work for your business similar to employees, however the key difference is that an independent contractor has more control over the means of accomplishing their job. As an employer you can still control the performance of the work, but you cannot control the specific details regarding how the work will be executed. Independent contractors are essentially self-employed individuals. A company does not have to withhold federal, state, and local taxes from payment. Instead, the independent contractor is responsible for satisfying all tax obligations.
Some employers rather hire independent contractors because of the reduced costs in payroll and taxes. However, an employer must be certain that the worker that is classifying as an independent contractor is truly an independent contractor.
Ten Factors for Determining if a Worker is an Independent Contractor:
Restatement Second of Agency, section 220, outlines ten factors that the court considers in determining whether the worker is classified as an independent contractor and not an employee.
The ten factors include:
- The extent of control that the employer has over the employee;
- Whether the independent contractor is engaged in other jobs;
- The occupation of the independent contractor and whether the work the independent contractor is performing is usually completed without supervision;
- The skill required in the job;
- Whether the employer supplies the instruments, tools, and place of work for the independent contractor;
- The length of time the independent contractor has worked for the employer;
- Whether the independent contractor is receiving pay by the time or by the job;
- Whether the work is part of the regular business of the employer;
- Whether the independent contractor and employer believe their relationship is of employer and employee; and
- Whether the hiring party is or is not a business
From the ten factors cited above the most important factor is the extent of control over the independent contractor. As an employer you cannot demand how, when, or where the independent contractor performs the work. An independent contractor has the majority of the control. Therefore, as an employer the extent of your control over the independent contractor is the results that you need him/her to achieve.
Although the extent of the control over the independent contractor is the most important factor, courts consider all the factors stated above. As an employer, the safest bet is to satisfy all ten factors so that there are no doubts that the worker is actually an independent contractor and not an employee. However, this can sometimes be impractical, therefore courts do not demand that all ten factors be met. It is common for courts to find that not every element is present, this does not negate the employer-independent contractor relationship.
Does an Independent Contractor Have to Use Their Own Computer?
After analyzing the factors cited above, you might be wondering whether or not you can provide your independent contractor tools to complete their work, like a computer. Although your safest best is to not provide your independent contractor with any tools, supplies, and equipment so that you can satisfy the fifth factor stated in the Restatement Second of Agency, section 220, this might be impractical.
A situation may arise where you have to give the independent contractor a computer, so what do you do then. If this is the case and there is no other way for the independent contractor to complete their work, then as an employer you must be certain that almost every other factor stated above is satisfied.
Courts do not demand that all ten factors be met and will still classify the individual as an independent contractor even if not every element is present. The courts analyze the factors based on the facts and circumstances in each case and ultimately the control factor is the most important factor, therefore as an employer that is the factor you should always keep in mind.