How to Determine Who Is an Employee
Versus Independent Contractor?

How to Determine Who Is an Employee Versus Independent Contractor?

Question- We routinely hire individuals to perform work around the association - lifeguards, maintenance workers, office staff, and landscapers. The question arises as to whether they are employees or independent contractors. How do we know?

Answer- Often, it may be difficult to determine whether an individual is an employee or an independent contractor. It is a very important distinction. Not only are there legal and liability issues (which I will not address), but there are tax issues which can end up being very costly for an association if the worker is re-categorized from independent contractor status to that of employee. There is no “black and white” answer to this question. The IRS developed 20 factors that are used to evaluate the facts and circumstances of each case. These are then “weighted” by the IRS, as not all 20 factors apply in all cases. Thus it cannot be stated that because the majority of the factors indicate employee status that the worker is automatically an employee. The key factor seems to be the degree of control over the worker.  Below is a brief summary of the factors, written in question form.  A “yes” response tends to indicate employee status while a “no” answer tends to indicate independent contractor status.

  1. Does the worker receive instructions about where, when and how to perform the work?
  2. Does the worker receive training from the association?
  3. Are the worker’s ongoing services integral to the association?
  4. Must the services be rendered personally by the worker?
  5. Does the association hire the worker’s assistants?
  6. Is there an ongoing relationship?
  7. Are there set working hours?
  8. Is there a full-time commitment required?
  9. Is the work done on the premises of the Association or at its office?
  10. Must the work be performed according to the dictates of the Association, in a particular manner or in a order determined by the Association?
  11. Are regular reports concerning the work’s progress required?
  12. Is the worker paid according to time incurred rather than by completion of the job/project?
  13. Does the association pay the worker’s expenses?
  14. Does the association supply the tools and materials needed to do the job?
  15. Does the worker have no investment at stake, such as equipment, materials, etc.?
  16. Is the worker protected from loss? (That is, the worker cannot lose money on a job/project nor make a higher profit)
  17. Is the association the only client or customer of the worker?
  18. Does the worker not advertise or hold himself/herself out to the public for work?
  19. Is there a right to fire the worker?
  20. Is there a right to quit?