Under IRS rules, workers are presumed to be employees. See the Department of Labor website for more information. Whether the work is part of an integrated unit of production.The degree of permanence of the working relationship between the worker and the potential employer.The amount of skill required for the work.Additional guidance. Three other factors act as additional guidance, particularly when the two core factors do not point to the same classification.The worker’s opportunity for profit or loss based on initiative and/or investment.The nature and degree of control over the work.To determine whether workers are in business for themselves or are economically dependent on an employer for work. The Fair Labor Standards Act Independent Contractor Rule states that employers should generally follow these federal independent contractor standards to determine if a worker is an independent contractor or an employee: There is a federal rule that govverns whether an individual is an employee or independent contractor. Each of these agencies has guidelines to help you decide whether you should be paid as an employee or as an independent contractor. Please check back for any developments surrounding the rights of “on-demand” workers.īoth the IRS and the DOL care about whether you are properly classified. Thus, legislation is being developed to determine these workers’ rights on the job such as minimum wage for all hours worked, right to a voice on the job, social insurance programs, and many other benefits and protections a normal employee would obtain. Employers of “on-demand” workers further argue that they are not employers and these workers are not employees however, critics of this arrangement now argue that these types of companies are performing a labor-brokering function. In this field of employment, employers have faced criticism for their treatment of these “on-demand” workers however, employers defend on the grounds that labor regulation will crush the innovation they seek to advance. An example of an “on-demand” worker is an Uber driver. No payroll taxes are deducted from money paid to a contractor.Ī new category of independent contractors is called “on-demand” workers which are employees that work for online app-based companies that are gaining revenue and profits from these workers. An employer is required to deduct payroll taxes from the pay of an employee. Employers that provide benefits to employees do not have to provide those benefits to contractors. Another example: an employer is required to pay its hourly employees minimum wages and overtime wages, but contractors don’t have to be paid any specific amount. For example, most federal laws that prohibit discrimination only apply to employees. If you are considered a contractor, you may not have the same legal rights as an employee. To find out more about what an independent contractor is and what the independent contractor status means for workers and employers, read below: It is the nature of the relationship that matters, and employers can be subject to stiff penalties if they misclassify workers. Employers must be careful to make sure that workers are properly classified because a worker’s title does not determine whether they are an employee or independent contractor. If you are an employee you are under the control of your employer, but also may have certain benefits provided by your employer including workers compensation, unemployment, and health insurance. As an independent contractor, you may have more freedom to choose how you complete your work, but you are responsible for paying your own taxes, getting your own health insurance, and paying into unemployment and workers comp funds if you wish to access those benefits. Any worker should understand how they are classified, and what it means. Knowing whether a worker is an employee or an independent contractor is important for both workers and employers.
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