Here’s a 7-step test that can help you determine independent contractor status. When your company hires independent contractors to perform jobs in your workplace, the status of these workers could make a big difference in terms of your liability should one of them be injured. Are these workers truly independent contractors or are they in effect your employees?
The Maine Department of Labor offers employers the following assistance in determining independent contractor status. Although these factors apply specifically to Maine’s employment laws, the same principles apply generally in most other states. It is, however, always wise to check with your company’s attorneys concerning contacts and worker status whenever your company hires independent contractors.
1. Is the individual under the direction or control of the independent contractor, not your employer, while working in your workplace?
2. Does the contractor have the right to control the means and progress of the work except as to final results?
3. Is the contractor engaged in an independently established trade, occupation, profession or business?
4. Does the contractor have the opportunity for profit and loss as a result of the services being performed for your company?
5. Does the contractor hire and pay his or her assistants (if any) and to the extent that these assistants are employees, supervise the details of their work?
6. Does the contractor make services available to other customers even if its right to do so is voluntarily not exercised or is temporarily restricted?
7. Do any 3 of the following elements apply?
- The individual has a substantive investment in the facilities, tools, instruments, materials, and knowledge used by the individual to complete the work.
- The individual is not required to work exclusively for your company.
- The individual is responsible for satisfactory completion of the work and may be held contractually responsible for failure to complete the work.
- You have a contract that defines the relationship and gives contractual rights in the event the contract is terminated by the you prior to completion of the work.
- Payment to the individual is based on factors directly related to the work performed and not solely on the amount of time expended by the individual.
- Such work is outside the usual course of the business for which the services is performed .
- The individual has an IRS Determination (SS-
of independent contractor status.
If the answer to all or most of the 7 questions above is yes, the individual or entity you are dealing with is likely an independent contractor, not an employee. And this fact can play an important role in limiting your company’s liability for injuries to an independent contractor’s employees.
