Ok. I have touched on the definition of what constitutes an independent contractor vs. an employee in prior articles. Still, so often there is so much riding on whether a worker is characterized as an independent contractor or an employee, both for the employer and the employee, I felt that a “tune-up” on this issue may be in order. So please excuse the length of this article, but there is no way to even touch on the subject in my usual 700 words or less size missive.
Factors Considered in Determining Whether Person Is Independent Contractor or Employee
In determining whether a person is an independent contractor or an employee, the following factors, based on the common law of agency, are considered:
- The extent of control that the one who ordered the work may, by the terms of the agreement, exercise over the details of the work.
- Whether the one performing the work is engaged in a distinct occupation or business.
- Whether in the particular locality the kind of work involved is usually done under the direction of the person for whom the work is performed or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the person for who work is performed or the person performing the work supplies the instrumentalities, tools, and the place of work.
- The length of time for which the person is engaged.
- Whether regular working hours are set by the person for whom work is performed.
- Whether payment is by the hour or month or for the job.
- Whether the person performing the work is engaged full time by one person.
- Whether the work is performed in a specific area or over a fixed route.
- Whether the work is a part of the regular business of the person for whom the work is performed.
- Whether the parties believe they are creating an independent contractor an employer-employee relationship.
- Whether the person who ordered the work is in business.
- Whether the services are terminable without cause at the will of the person for whom the work is performed.
- Whether under the terms of the agreement the work may be delegated.
A few of these factors that have been particularly significant in my experience are discussed in greater detail below.
Weight of Factors
Whether a person is an independent contractor or an employee is generally a question of fact.
In determining whether a person is an independent contractor or an employee, the most important question is which party has the right to control the manner and means by which the work is accomplished. If the person engaging the services of the other has the authority to exercise complete control over the details of performing the work, an employer-employee relationship exists. If, on the other hand, the person performing the work has the right to control the manner and means by which the work is accomplished and is under the control of the person engaging his or her services only with respect to the desired result, the relationship is one of independent contractor.
Right to Control Manner and Means of Work
In determining which party has the right to control the manner and means of performing the work, courts examine how much independent judgment is left to the person performing the work with respect to each task that must be undertaken in accomplishing the result. One case, for instance, involved contracts between television writers and a television producer. The television writers worked on their own time, at their own expense, in their own way, with their own instrumentalities, and at a place of their own selection. A distinct contract was executed for the writing of each teleplay. The employment terminated when the play was completed, and a writer could be compelled by the producer only to make two drafts of a teleplay. After the contract became operative, however, the desires, suggestions, requests, and directions of the producer’s staff were, in effect, commands with which the writers had to comply, unless they could convince the producer that the suggested changes were inappropriate. Failure to comply resulted in forfeiting future employment. The trial court found that the writers were employees and the California Supreme Court affirmed.
Ownership of Tools and Instrumentalities
Ownership of tools and instrumentalities also bears on the question of control. The fact that the person performing the work supplies the tools is some evidence that he or she is an independent contractor. If, on the other hand, the person for whom the work is performed supplies the tools, he or she is likely to instruct the worker as to their use, and, therefore, the implication is that the relationship is one of employer-employee.
Period of Employment and Manner of Payment
The period of employment and the method of payment are relevant in determining the amount of control exerted by the person for whom the work is performed. The shorter the period of employment, the less likely it is that the person performing the work will subject himself or herself to control as to details, and the more likely it is that the job will be considered the job of the person performing the work, as opposed to the job of the person for whom the work is performed. This is particularly true if payment is for the job rather than by the hour. If, however, the work is not skilled, or if the person for whom the work is performed supplies the tools and instrumentalities, the person performing the work may be considered an employee.
Persons for Whom Services Are Performed
If an individual performs the same type of work for many persons, the implication is that he or she is an independent contractor. On the other hand, devoting one’s full time to performing work for one person points towards an employer-employee relationship.
Right to Terminate Work Relationship
The right of the person for whom services are rendered to discharge the worker at will without cause is strong evidence in support of an employment relationship. The power of the person for whom the work is performed to terminate the relationship at any time is incompatible with the full control of the work usually exerted by an independent contractor. However, the right of discharge alone is not conclusive evidence that a person performing work for another is an employee. Thus, an independent contractor agreement can properly include an at-will clause giving the parties the right to terminate the agreement without cause, and such a clause does not by itself change the independent contractor relationship into an employer-employee relationship.
On the other hand, while an at-will employee may quit at any time without incurring liability, an independent contractor is legally obligated to complete the contract. Therefore, the presence of a contract requiring completion of certain tasks raises the implication that the person is an independent contractor.
Employees of Independent Contractor
An independent contractor often has employees. Those employees may not be treated as employees of the other party to the contract (the principal). The independence arising from the contractual relationship between the contractor and the principal implicitly shields those employees from being subject to supervision or direction by the principal.
Ok, you should be good for another 3,000 miles …