Independent Contractor or Employee? Far too often, employers erroneously misclassify individuals as independent contractors or employees. In an attempt to save money, many businesses use independent contractors to serve functions typically served by employees. Classifying someone as an independent contractor often means the business does not have to pay minimum wage or overtime to the individual.
In determining whether someone is an independent contractor or an employee the U.S. Department of Labor uses what is known as the "Economic Realities Test," which contains the following factors:
- the degree to which the person's work is controlled by the organization;
- the individual's investment in facilities and equipment, if any;
- the individual's opportunities for profit or loss, if any;
- the amount of any initiative, judgment, or foresight the person uses in open-market competition;
- the permanency of the relationship; and
- whether and to what extent the individual's work is an integral part of the organization's business or activities.
If you have any questions about your classification as an independent contractor, please contact us for a free initial consultation.