Agenda - 02-08-2005-2b - Laserfiche WebLink

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10 Attachment 2 Determining Employment vs. Independent Contractor Relationship (From the Internal Revenue Service Website and "Independent Contractor or Employee..." Brochure dated 12-99) In general, someone who performs services for you is your employee if you can control what will be done and how it will be done. The courts have considered many facts in deciding whether a worker is an independent contractor or an employee. These facts fall into three main categories. In each case, it is very important to consider al the facts - no single fact provides the answer: Behavioral Control - Facts that show whether the business has a right to direct or control the worker. The business does not have to actually direct or control the way the work is done - as long as the employer has the right to direct and control the work. For example: Instructions - if the person receives extensive instructions on how the work is to be done, that suggests an employee. Instructions can cover a wide range of topics: 1. How, when or where to do the work 2. What tools or equipment to use 3. What assistance to hire to help with the work 4. Where to purchase supplies and services If the person receives less extensive instructions about what should be done, but not about how it should be done, this may suggest an independent contractor. For instance, instructions about time and place may be less important than directions on how the work is performed. o Training - If the business provides the person with training on the required procedures about required procedures and methods, this indicates the business wants the work done in a certain way and that suggests an employee. Financial Control - Facts that show whether the business has a right to direct or control the business aspects of the worker. These include: o The extent to which the worker has unreimbursed expenses. o The extent of the worker's investment in the work. o The extent to which the worker makes services available to the relevant market, o How the business pays the worker. o The extent to which the worker has the opportunity to realize a profit or incur a loss. Type of Relationship - Facts that illustrate how the business and the worker perceive their relationship. For example: o Written contracts describing the relationship the parties intended to create o Whether the worker is provided with employee-type benefits o The permanency of the relationship. o How integral the services are to the principal activity of the business.