DBTC Law Firm

Independent Contractor Or An Employee In Sheep’s Clothing?

Independent contractors are attractive to many businesses as the business avoids the overtime, insurance and tax expenses that are required to be paid on behalf of an employee.  Additionally, the business is, generally, not subject to tort liability for the negligence of an independent contractor.  These savings sometimes sway a business to characterize a worker as an independent contractor, when, legally, the worker is not considered an independent contractor.  Unfortunately, improperly classifying an employee as an independent contractor can result in hefty fines, taxes, penalties and liabilities for your business.  Also unfortunately, the specific tests used to determine this differs among various agencies who regulate it: IRS standards differ from Workers Compensation insurance standards, differ from wage and hour standards, differ from tort liability standards.

Generally, an independent contractor is defined as one who contracts to do a job according to his own method, with his/her own tools, and without being subject to control of the other party, except as to the result of the work.  Generally, the determination of whether an independent contractor relationship exists primarily hinges upon the employer’s right to control the work of the independent contractor.  It is the right of control, not the actual control, that matters.  The greater the right to control, the more likely an employer/employee relationship exists.  Although control is the primary factor examined in determining a worker’s status, it is not the only factor considered.

For purposes of general liability, the Arkansas Supreme Court has laid out ten factors to consider in determining whether an individual is an employee or independent contractor. These factors are:

1. The extent of control which, by the agreement, the master may exercise over the details of the work;

2. Whether the one employed is engaged in a distinct occupation or business;

3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

4. The skill required in the particular occupation;

5. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

6. The length of time for which the person is employed;

7. The method of payment, whether by the time or by the job;

8. Whether the work is a part of the regular business of the employer;

9. Whether the parties believe they are creating the relation of master and servant; and,

10. Whether the worker represents the independent contractor services as a business, separate from him as an individual.

Applying such factors to the circumstances surrounding your purported independent contractor requires a careful and thorough examination.  Moreover, depending upon the nature of the risk, e.g., unemployment taxes, the Fair Labor Standards Act, tax or tort liability, the weight of the above factors can vary, or the entire standard may be different.  Please contact this firm if interested in reviewing your business’s independent contractor relationships.

Leave a Reply