Is that Worker an Employee or an Independent Contractor?
by Stephanie L. V. Hendricks, owner of Hendricks Law Firm
Determining if a worker is an employee or an independent contractor usually depends on a number of factors, and in some cases, the answer may not be clear.
In cases where making the determination may turn out to be difficult, it may be useful to enter into a written agreement indicating the parties’ intent and defining the terms of the relationship. The party preparing the agreement might consider specifying the factors that support the desired classification of the person providing the services.
However, just because the parties say that a person is an independent contractor does not mean that a court will agree.
In New York, it is likely that, while the terms of a contract will be helpful in making the determination, the following are factors that a judge will consider to determine whether an individual is an independent contractor and not an employee:
- whether the person controls the time and manner in which the work is to be done;
- whether the person has a Federal Employer Identification Number from the Federal Internal Revenue Service (IRS) or has filed business or self-employment income tax returns with the IRS based on work or service performed the previous calendar year;
- whether the person maintains a separate business establishment from the hiring business;
- whether the person performs work that is different than the primary work of the hiring business and performs work for other businesses;
- whether the person operates under a specific contract, is responsible for satisfactory performance of work, is subject to profit or loss in performing the specific work under such contract, and is in a position to succeed or fail if the business’s expenses exceed income;
- whether the person has a liability insurance policy (and if appropriate, workers’ compensation and disability benefits insurance policies) under his or her own legal business name and federal employer identification number;
- whether the person has recurring business liabilities and obligations;
- whether the person has business cards or advertises for themselves or their own business;
- whether the person provides all equipment and materials necessary to fulfill the contract; and
- whether the person works under his or her own operating permit, contract or authority.
Courts will generally tend towards concluding that the person is an employee, rather than a general contractor unless a clear case can be made that the person is, effectively, running their own business, and the “employer” is only one of many clients of the business.
Stephanie Hendricks owns Hendricks Law Firm, which focuses on providing New York entrepreneurs, small businesses, and start-ups with a full range of business services. Stephanie Hendricks provides pro bono legal services monthly at NYC Business Solutions, Staten Island Center.
Note that this blog is for informational purposes only and should not be relied upon as a legal advice.
The views, opinions, or expressions provided by Stephanie Hendricks do not necessarily represent the views, opinions, or expressions of the City of New York, the New York City Department of Small Business Services, and/or NYC Business Solutions.