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6 Key Factors That Can Determine Whether Someone Is an Employee or an Independent Contractor
Having the freedom to work for yourself, set your own hours, and choose what clients you work with are just some of the benefits of being an independent contractor. But it’s not always easy to determine whether the role you’re in should be classified as an independent contractor or an employee. It’s also possible for clients to try to blur the lines between independent contractor and employee and potentially take advantage of your arrangement. Knowing some of the key differences between these two types of employment can help you protect your interests.
1. Training
In general, independent contractors are retained because they are already experts in their fields and are able to jump in and start working on a project or providing services immediately. Employees need to learn how to provide the company’s services or be trained on how the company conducts business.
It’s possible for a contractor to need a quick overview of how a client’s communication platform, such as Slack or Telegram, works or the brand’s history and mission statement. But this doesn’t usually escalate to the point of training and is considered more of an extension of the discovery phase when working with a client.
2. Work Schedule
Work schedule and how a person’s working hours are determined is a key factor in deciding whether someone should be classified as an independent contractor or an employee. Independent contractors set their own hours and have autonomy over their schedules. They can be responsible for deliverables or milestones, but how and when they get that work done is up to them. Employees, on the other hand, are usually held to a certain schedule or number of hours per week. For example, a shift worker at a plant may be reprimanded if they are even 10 minutes late, and even remote employees may be expected to be available for calls or chat messages from 9 a.m. to 5 p.m.
If an independent contractor and client mutually agree to a certain number of hours or availability for certain times of the day, this should be expressly laid out in the contract.
3. Employer Control
How much control an employer has over the person is one of the most important determining factors in whether a position is classified as an employee or an independent contractor. An employer can dictate most of how an employee works. This includes when they work, where they work and what they do.
Independent contractors retain that autonomy. Instead of being told what to do and having an employer/employee relationship, they are viewed more as partners or consultants. They are responsible for a certain output, whether that’s delivering content or providing sales consulting services, but how they do the job is up to them.
In addition, employees generally work either on the premises of the business or at the location of a client. For example, a gas station attendant works at the gas station itself, and a plumber works on various job sites related to the employer. Independent contractors work wherever they want to, whether that’s in a home office or coworking space. It’s also possible for independent contractors to work on job sites in some cases.
4. Payments
Employees are generally paid either by the hour or on a salary basis. The employer is also responsible for withholding income taxes, Social Security contributions, and Medicare contributions. Independent contractors can have a variety of payment arrangements, including being paid hourly, but in general, they are paid by the job. Independent contractors are responsible for paying their own taxes, Social Security, and Medicare.
Another key difference is that an employer decides how much they are paying an employee, while the independent contractor decides how much they are going to charge the client.
5. The Presence of Other Clients
Whether or not a person is allowed to work for more than one company can help determine whether they are an independent contractor or an employee. It’s common for employees to have non-compete clauses in their contracts or to not be allowed to work another full-time job at the same time. Independent contractors usually have multiple clients and are often working for more than one at the same time. Independent contractors commonly work under nondisclosure agreements, but they don’t generally accept noncompete clauses or anything that precludes them from being able to do business with a client’s competitor.
6. Contract Terms
Employees are able to quit their jobs at any time, and employers can also fire employees. However, this isn’t the case for independent contractors. Once the contract is signed between the contractor and the client, both are responsible for upholding the terms of the agreement. The independent contractor can’t just decide not to continue working with the client unless there are provisions in the contract for this situation. Likewise, a client can’t fire an independent contractor unless they pay a kill fee or follow the terms of the agreement. These relationships are often based more on contract law than employment law.
If you believe you have been misclassified as an independent contractor or a client is trying to push the boundaries into employee territory, Riggan Law Firm, LLC, can help. Our experienced employment law attorneys can help you determine what your proper employment classification should be and fight back against employers and clients who are trying to take advantage of you. Call our office at 314-684-8406 to get started.
