EMPLOYEE VS INDEPENDENT CONTRACTOR
agencies make the determination whether your workers are employees or
independent contractors - the Idaho Industrial Commission (workers' compensation
the Idaho Department of Labor, and the Internal Revenue Service. Each agency
uses its own guidelines and makes its own decision when classifying
The guidelines below are used by the
Idaho Industrial Commission. Internal Revenue Service guidelines can be
found at http://www.irs.gov/businesses/small/article/0,,id=99921,00.html.
Coverage under the Workers'
Compensation Law is dependent upon the existence of an employer-employee
relationship. Considered collectively, four right-of-control factors
distinguish an employee from an independent contractor.
1. DIRECT EVIDENCE OF THE RIGHT TO
Compliance with instructions - Control
is present if the person for whom the services are performed has the
right to require compliance with instructions throughout the process,
not just for the final product or service.
Training - Mandatory training through meetings,
attending classes, or apprenticeship with a more experienced worker
indicates the right to control.
Integration - Integration of the worker's services into the
principal's business operations shows
the worker is subject to direction and control.
Services rendered personally - If the
services must be rendered personally, then the right to control is
Hiring, firing, supervising and paying
assistants - If the person for whom services are rendered hires,
discharges, and pays workers, then that factor shows control over all
workers. If a worker engages his own assistants, he may be an
Set hours of work - Control is
indicated if set hours of work are established by the person for whom
services are rendered.
Full time required - If the worker
devotes substantially full time to the business of the person for whom
services are rendered, then such person has control over the amount of
time the worker can work and impliedly restricts the worker from doing
other gainful work.
Order or sequence determined by
principal - If the worker performs services in the order or sequence
determined by the person for whom the services are performed, the worker
is likely an employee.
Oral or written reports - A
requirement that the worker submit regular oral or written reports to
the principal indicates control.
Payment of business and/or traveling
expenses - If the principal ordinarily pays the worker's business or
traveling expenses, then the worker is usually considered an employee.
Rejecting work opportunities - If the worker has the right to accept
or reject work on a particular project without fear of loss of
employment, this indicates an independent contractor.
Working for more than one firm at a
time - If a worker performs service for several unrelated persons or
firms at a time, this is indicative of an independent contractor
Making service available to the
general public - If a worker makes his services available to the general
public on a regular and consistent basis this indicates an independent
Competitive selection among
subcontractors - If the principal uses some competitive means for
reducing his own cost in selecting a subcontractor, then the principal
may be a prime contractor instead of an employer.
2. METHOD OF PAYMENT
Payment on a regular, periodic basis -
Payment by the hour, week, day, month or other regular periodic interval
generally points to an employer-employee relationship.
Realization of profit or loss - A
worker who can realize profit or suffer a loss as a result of the
worker's services (beyond the profit or loss ordinarily realized by the
employees) is generally considered an independent contractor.
3. FURNISHING OF MAJOR ITEMS OF
Working on the employer's premises - If the work must
be completed on the premises of the person for whom the services are
performed, this shows control over the worker, particularly if the work could be completed elsewhere.
Furnishing tools and equipment - If
the person for whom services are performed furnishes significant tools,
materials, or other equipment, this indicates a direct employment
relationship. An independent contractor should own his/her own tools and
Significant investment - If the worker
invests in facilities that are used in performing services and that are
not typically maintained by employees, this indicates an independent
Realization of profit or loss - This
factor overlaps the method of payment but addresses whether sale of the
business assets would provide the worker with a gain or recovery. If so,
he may be an independent contractor.
4. RIGHT TO TERMINATE RELATIONSHIP
Continuing relationship - A continuing
relationship between the worker and the principal indicates a direct
employment relationship, even if the work is performed at recurring
Right of employer to discharge - The
principal's right to discharge the worker without liability indicates a
direct employment relationship.
Employee's right to terminate - If the
worker has the right to stop working at any time without contractual
liability, this is indicative of an employment relationship.