If you’re a worker in America, then it’s important for you to know the difference between an independent contractor and an employee. Those two classifications are different, yet some employers do misclassify their employees. When that happens, employees who should be receiving benefits don’t receive them, because they’re being classed as independent contractors unfairly.
The term “independent contractor” is defined by the Internal Revenue Service. The IRS states that the general rule is that individuals are independent contractors when the person paying them only has the right to direct or control the results of the work that is being performed, not how it’s done or what is done.
Here’s an example. If John is an independent contractor working as a face painter, then he should have the right to schedule clients and take bookings. The client who pays him has a right to ask for a certain appointment time or painting. If the client tries to start telling him to wear a uniform, tells him where he can be educated, describes specific tools he must use or other terms, then the situation may be turning into employment.
Every case has to be handled differently when an employee or independent contractor may be misidentified. Why? There are gray areas, and it’s important to take each case individually and to review how the worker is affected.
When an employer-employee relationship is determined to exist, then you will not be considered an independent contractor. If that happens, then the person who hired you may be required to provide you with benefits or to cover employment taxes, whereas you would not be subject to self-employment taxes.
Why do some workers get misclassified?
Sometimes, the misclassification is accidental or unintentional. Other times, an employer may attempt to wrongly classify a worker as an independent contractor to avoid paying benefits or employment taxes for that individual.
Any worker who is unclear about their classification should talk to their employer about it. Then, if there is any kind of dispute or disagreement, it may be worth speaking with an employment law attorney to determine the true classification that is required.