How to Define If You Are an Employee or an Independent Contractor
Considering the last few years, most people might be thrilled to have any job. Still, there’s a massive difference between being considered an employee and an independent contractor.
Businesses are always looking to save a buck. It makes sense. They’re looking to enrich the people at the top. However, workplace protections are in place to take care of you.
Being an employee confers a ton of benefits managers may not want to shell out for. If you’re an independent contractor and are curious about whether or not you may be entitled to those benefits, read on.
The Definition of an Independent Contractor
First off, what does it mean to be an independent contractor? It’s a tricky classification that mainly focuses on the amount of control an employer has over a service or product created by the independent contractor. The U.S. Department of Labor (See Fact Sheet 13) provides some guidance on the definition of an independent contractor but you should discuss the specifics of your job with Fair Labor attorney Nick Martin.
The benefit of being an independent contractor is the freedom of working the way you want to and not having someone else tell you how to do it. As an independent contractor, your employer only has a right to control the result of the work, not how the work is done.
The Self in Self Employed
The designation is really important, because being an independent contractor shifts a lot of extra weight onto you. Generally, independent contractors are responsible for equipment, tools, and material needed to fulfill their role.
The self-employment tax burden is higher because you don’t have an employer paying your Social Security and Medicare taxes. An independent contractor is likely responsible for their retirement fund and healthcare plan.
What’s the Difference?
Then again, being an employee comes with drawbacks as well. You’re beholden to the manager’s timeline, not your own. They control what you do and how you do it.
The financial bonuses of being named an employee are many, but being an independent contractor means you’re able to ply your trade to multiple companies, work in the way that benefits your life the most, and keep the mobility to change your life at the drop of a hat.
As an independent contractor, you’re your own boss and that’s appealing to a lot of people.
How To Tell If You’re an Employee or Independent Contractor
So, what are some clues to help find out what side of the fence you’re on?
One of the primary ones comes down to billing. If you’re on the payroll and regularly receive a paycheck, you’re not an independent contractor.
You’re an employee if you rely on the business as your sole source of income. Being an independent contractor, though, also comes down to how you operate within the business, not just how you’re paid.
There are three broad categories to consider when asking legal questions about your classification:
- Behavioral Control
- Financial Control
- Relationship of the Parties.
Behavioral Control covers whether business has a right to direct how the work is accomplished. How much control does the business exert over your hours, your method of work, and so on?
Financial Control indicates if the business can control the financial aspects of the worker’s job. What are your unreimbursed business expenses? How available are your services to a given market? What is the level of investment the company has in your tools or facility?
The third category is the Relationship of the Parties. Do you have a written contract describing your relationship? How permanent is your working relationship with the business? Is your work integral to the business?
There are grey areas in everything, but these are questions you should be asking yourself if you feel you might be missing out on employee benefits.
What is Misclassification?
Being paid like an independent contractor when you’re really an employee is called “misclassification.” Sometimes it’s an honest mistake, but a lot of times, it’s an intentional move to save the company money. If they can get away with shifting the burden of paying for Social Security and Healthcare onto you, they’ll do it.
Not just that, but if you’re misclassified as an independent contractor, you may be missing out on hourly wage benefits, such as overtime.
There are indicators that up to a full 10% of the American workforce is misclassified as independent contractors, robbing them of their due benefits.
Being an independent contractor can be great, but there’s no denying that businesses have a financial incentive to keep you off their payroll, off their health insurance, and on your own.
Atlanta Fair Labor Lawyer
If you have questions about whether your company might be taking advantage of your position by misclassifying you, call The Law Offices of Nicholas P. Martin now for a free consultation.
We’ll find out what your classification is and work to make sure you’re paid what you’re due.
Nick enjoys helping the people of Atlanta with their personal injury and fair labor issues. When he’s not working, Nick can be found woodworking, competitive rifle shooting, enjoying the outdoors, and spending time with his family.
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