What is an independent contractor?

Typically, an independent contractor is a person who provides goods or services to another under terms specified in a contract or verbal agreement. However, as with the question of what is an employee, determining what is an independent contractor depends on the relationship between the parties, the facts surrounding the particular job, and the law that applies.

Who Has Control?

Under the common law, an independent contractor is a worker who has the right to control the details of his own work. In other words, if an employer cannot tell the worker what to do and how and when to do it, that worker is an independent contractor. By contrast, the worker whose job is controlled by an employer is an employee.

Thus, a worker who is free to set his own hours and is not directed how to complete his work is an independent contractor. For example, if you hired an electrician to install a ceiling fan in your home but left it to his discretion how the work should be performed, that electrician is an independent contractor. The only direction is about the end result—that a ceiling fan is installed. There is no control over how the electrician should go about the job. On the other hand, a worker of a moving company would be an employee where his supervisor told him which boxes to move, where to move them to, and how he should go about moving them—by hand, by forklift, etc.

Other Factors Used To Determine Classification

While the right to control is the key factor in determining who is an independent contractor, there are other factors that lean towards classifying a worker as an independent contractor. If a worker provides his own tools, has the right to hire and pay assistants, is paid hourly or by commission, this might indicate he is an independent contractor. Further, the lack of benefits such as health insurance or vacation pay might show that a worker is an independent contractor. For example, an insurance agent who rents his own office, pays for phones and electricity, develops his own client base, hires assistants, and sets his own hours is an independent contractor. Similarly, a taxi driver who provides his own car, chooses who to pick up and the routes on which he will take his passengers, and is given no paid vacation is an independent contractor.

Employee Status Cannot Be Changed By Agreement

However, the fact that a worker and employer agree that the worker is an independent contractor or that the worker prefers to be an independent contractor does not mean that the worker is in fact an independent contractor. If the worker fits the definition of an employee based on an analysis of the overall job duties and nature of the relationship, then the employer is required to treat that worker as an employee. So, for example, even if a worker signs an agreement titled “Independent Contractor Agreement,” whether or not he is an independent contractor still depends on whether he can exercise control over how he does his job.

Independent contractors generally have fewer rights than employees. They are not protected by many employment laws and generally ineligible to receive employment benefits. Also, they have to pay their own FICA, Social Security, Medicaid, and Medicare taxes. Independent contractors are not protected from discrimination based on gender, race, religion, national origin, age, or disability. They also do not have the right to organize and bargain collectively. Independent contractors are not entitled to receive minimum wage or overtime pay and their employers are not obligated to provide unemployment insurance or workers’ compensation.