Last week I posted Five Signs Your Independent Contractor May Be Properly Classified. While I feel pretty good about the post, I also feel like there’s more where that came from. So here goes.
Five More Signs Your Independent Contractor May Be Properly Classified:
- The contractor has its own employees. Since contractors are in business for themselves, they should be free to hire their own employees. If they actually do, chalk up a few points.
- The contractor pays its own expenses. One indicator of a legitimate independent contractor relationship is that the contractor, if a sound businessperson, will earn a profit but, if a poor businessperson, will incur a loss. The profit/loss determination is often a function of how well the contractor prices its services. If you reimburse a contractor for all of its expenses, the risk of loss is generally removed. Legitimate independent contractors should be bearing some risk.
- The contractor works from its own office space. The flexibility to work wherever and whenever suggests proper classification as an independent contractor.
- The contractor works using its own tools and equipment. That’s more evidence that the contractor is running its own business and has more opportunity to incur a net loss.
- The contractor carries its own insurance. When a contractor carries the types of insurance typically carried by a business, the contractor is likely operating as a business. Look for General Commercial Liability and Workers Comp coverage.
Remember, the tests for determining Who Is My Employee? vary by law, and most test are balancing tests, so no single factor is likely to be determinative. Relationships with these five features, however, are more likely to have the scales tilted in favor of recognizing independent contractor status.