Independent Contractor Employment Laws
Independent contractors exist in every industry and are often referred to as freelancers, consultants, or self-employed. Even though an employer might use the term independent contractor to describe a worker, there are various legal tests that courts implement to determine if a person actually is an employee.
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History
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Employers receive many legal advantages by hiring independent contractors. For instance, the independent contractor is responsible for federal, state, and social security taxes, which the employer does not have to withhold. Additional cost savings develop as independent contractors do not receive health or vacation benefits. Plus, employers do not have to pay workers' compensation or unemployment on behalf of independent contractors.
Significance
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There are federal and state laws that address independent contractor employment, though jurisdictions have different statutes and interpretations on the subject. Most analysis hinges on the actual rather than the intended relationship to determine if a worker is an independent contractor or an employee.
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Features
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One major factor involves an employers' control. An employer-employee relationship can develop when the employer substantially controls the worker. Consider a newspaper company that hires independent contracts to deliver papers. If the company controls the delivery person's work, such as by requiring a specific route and creating a time frame (e.g., drive on Apple Street, Cole Lane, and then Banana Field by 6 a.m., 6:10 a.m., and 6:23 a.m. respectively), then the actions, instructions, and control might prove that the delivery person is really an employee.
Effects
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Under federal law, the Fair Labor Standards Act was enacted in 1938 to addresses employee rights, such as concerning minimum wages, overtime pay, and child labor. Independent contractors usually do not benefit under the FLSA because the legislation essentially applies to non-exempt employees, who often are hourly workers.
Warning
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Various government agencies, including the U.S. Department of Labor and the Internal Revenue Service, can uncover that an independent contractor should be classified as an employee. Employers that incorrectly identify independent contractors risk government penalties and civil liability. For example, if an independent contractor delivery person negligently causes a deadly accident, a viable legal claim might be made against the employer because the delivery person was actually an employee.
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