As mentioned in the previous article about employment contracts and independent workers, there are many misconceptions regarding what it is that defines an independent contractor from an employee. If your employment arrangement comes to an unhappy end and you wind up in court, the legal status of your agreement will be in question.
Employment law requires more than just a label and an employment contract to determine a worker’s true status. When evaluating a so-called “independent contractor,” the courts have strict tests and will examine the relationship between worker and employer as conducted over time.
Employment Law - Employees Vs. Contractors: What’s the Difference?
- Employees typically function in a subservient position. How, when and where the work is completed is controlled by the employer. Employees are bound to abide by these requirements and may be disciplined for noncompliance. The employer usually supplies tools and materials for the employee’s tasks.
- Independent contractors aren’t generally expected to abide by the same behavioural conditions required of employees. They have control over how they complete their work, their methods aren’t supervised or imposed upon by the hirer and they have their own tools of the trade.
The differences seem rather cut and dry, but problems frequently arise when contractors migrate towards the employee part of the spectrum.
Employment Law - The Reliance Test
An employment contract is only part of the equation as the worker’s control and overall integration also come into play. As employment laws are distinctive, a contractor who is found to have any kind of employment-like reliance may be viewed as an employee. Factors such as: who controls the work, who controls the worker, and an analysis of profit gain or risk of loss are included in the evaluation.
- Independent workers must rely upon themselves to make a living by working for multiple clients; subsequently or simultaneously. It’s their responsibility to find consistent employment. As such, they have a controlling interest in their professional profit or loss margins and assume the associated benefits and risks.
- Employees don’t usually take a substantial chance on the overall profit or loss of the company they work for. They’re economically reliant on the employer for their income, and expect a consistent supply of work and pay or remuneration for their work.
The courts measure the results on a sliding scale, and the worker in question will be placed somewhere between pure independent contractor and pure employee.
Employment Law - Steps To Maintain Independent Contractor Status
Labels and employment contracts simply aren’t enough. While there aren’t any guarantees as to which way a court will rule, there are five steps employers can take to minimize the migration into employee status.
- Ensure that the worker has worked for and continues to have the right to work for other clients.
- Don’t assign identical tasks. The worker’s jobs and employee’s jobs must be different.
- The worker shouldn’t be supervised by your staff.
- Avoid workloads that lead to the worker becoming solely reliant on you for their income.
- Don’t integrate a worker into your operations in any way that is similar to an employee.
The lines between the contractor and the employee must be clearly drawn in the workplace. While many employment arrangements can continue satisfactorily without any questioning of status, it’s best to be prepared and protect your business. If you would like to take a closer look at your situation, or would like to learn more, please contact Employment Lawyer, Bob Yeager.
