Independent Contractor: the Eye of the Beholder
For some 10-15 years, employers have been trying to save some money by transforming traditional employees into independent contractors. Different entities use different tests to determine whether an employee is truly an independent contractor. I previously wrote about the various tests here. One commonly used test is that employed by the Texas Workforce Commission. The TWC test looks at:
- Who tells the employee how to do the job: a true independent contractor determines himself how he will accomplish a given task.
- Training: who provides the training: a true independent contractor provides his own training.
- Integration: the services of an independent contractor are easily separated from that of the larger employer.
- Services rendered personally: a true independent contractor can assign the task to a subordinate and need not perform the service personally.
- Hiring, supervising: an independent contractor can hire, select, pay the workers himself.
- Continuing relationship. The work of an independent contractor is usually of a definite time period. It does not continue in perpetuity.
- Set hours of work: an independent contractor sets his own hours.
- Full time required: an independent contractor need not work for the employer exclusively.
- Location of services: an independent contractor performs the work where he chooses.
- Order of sequence. An independent contractor is concerned only with the final product. The sequence in which the work is performed do not concern him
- Oral or written reports: an independent contractor is usually not required to submit regular reports or updates.
- Payment by hour, week or month: an independent contractor is generally paid by the job, not by a set time period.
- Payment of business & travel expense: an independent contractor is normally paid for his/her business and travel expenses.
- Tools & equipment: an independent contractor provides his own tools.
- Significant investment: an independent contractor has a significant investment in his business. An employee has little or no investment in the business for whom the work is performed.
- Profit or loss: an independent contractor can realize a profit or loss from one job depending on the result.
- Working for more than one firm at a time: an independent contractor often works for more than one business at a time.
- Making service available to the public: an independent contractor generally makes his services available to the public at large. An independent contractor may hang a shingle or advertise his services.
- Discharge without liability: if the work satisfies the contract terms, an independent contractor cannot be fired without incurring liability for breach of contract.
- Right to quit without liability: an independent contractor is legally responsible for job completion. If he quits, he becomes liable for breach of contract.
These are 20 factors in the TWC test. The other tests also include many different factors. But, generally, the courts look to a few factors more than most: right to hire/fire; providing one’s own tools and equipment for the work; freedom to take on other work; how integral is the work to the business; and how the employee is paid are probably the most important factors.
If the work to be performed is so integral to what the business does, the courts are less likely to see the work as a true independent contractor. For example, if a bakery hires someone to bake a certain type of pastry, that worker is likely to be viewed an an employee. But, if the same Baker hires someone to install a new electrical lamp, that work will be seen as not integral to the sort of work normally performed by that bakery.
See the TWC website here for more information.