When is an Individual an Employee
When is an individual an employee?
California has stricter standards than the Federal government when it comes to determining employee status. They have 11 criteria they use to judge whether somebody is truly an employee or an independent contractor, and failing just one can result in a determination of employee status. Such a determination could result in taxes, penalties, and interest being assessed to the employer. The 11 factors are:
DISTINCT TRADE OR OCCUPATION
Employee:
Not established in business. Usually works for a company.
Company hires and pays assistants. Manages company employees.
Independent Contractor:
Available and advertises to public (website). Has business expenses, issues invoices, and has a business license.
Hires, supervises, and pays own assistants.
EXTENT OF ACTUAL CONTROL
Employee:
Can quit or be terminated at will without liability.
Must follow company procedures. Meetings and/or reports may be required.
Services must be rendered personally. Work schedule set by the company.
Independent Contractor:
Responsible to finish work - may face repercussions for terminated contract.
Not required to follow instructions. Uses own professional judgement.
Worker can subcontract to others. Sets own schedule.
SKILL LEVEL
Employee:
Company provides additional training, processes, methods, and/or systems.
Independent Contractor:
No training required. They are an expert in their field
SUPERVISION
Employee:
Supervised as to manner and method of performing job.
Independent Contractor:
No supervision.
SERVICES BENEFIT THE PRINCIPAL
Employee:
Work performed for benefit of business.
Independent Contractor:
Work performed for personal benefit of individual.
PROFIT AND LOSS
Employee:
No financial investment required. Expenses reimbursed.
Independent Contractor:
Worker has financial investment. Assumes opportunity for profit and risk of loss
METHOD OF PAYMENT
Employee:
Time-based rate: hour, week, or other regular basis.
Independent Contractor:
Flat rate, per project or progress payments, retainer, or contingency basis.
TOOLS AND PLACE OF WORK
Employee:
Determined by the business. Provided if required.
Independent Contractor:
Worker chooses and provides tools
REGULAR PART OF BUSINESS
Employee:
Services are part of the company's regular business activity.
Independent Contractor:
Services are incidental or supportive of business activity.
LENGTH OF TIME
Employee:
Continuous relationship including seasonal, temporary, and/or part time.
Independent Contractor:
Project oriented. Sporadic in nature.
BELIEF OF PARTIES
Employee:
Both parties believe relationship to be of employment.
Independent Contractor:
Both parties believe relationship to be independent.