Employee vs. Independent Contractor – Part 4
Are you entitled to minimum wage and overtime pay? That depends on whether you are an independent contractor or a W2 employee.
Did you receive a 1099? That is no guarantee you are an independent contractor. Here’s the next installment – the fourth of six factors – of the “Economic Reality Test” – to help clarify where you stand… or sit.
How much control do you have at work? Do you hire? Fire? Create schedules? Make sure everyone is being paid? All of these are indicators for whether you are an independent contractor or an employee. As an employee, you may have some, or all of these responsibilities. As an independent contractor, you generally have all of these responsibilities. So, what is the real difference? The biggest indicator is your level of control over these factors. If you are reporting in a hierarchy, that indicates employee status. If the buck stops with you, it indicates independent contractor status.
There are some factors that do NOT indicate employment status. Any state, federal, tribal, or local regulations that are in place and must be followed are NOT indicators of employment status.
Scenario A: You are a marketing genius. You hire out your skill set to business owners to help bring in the business. You decide what hours you work, how much work you take on, and what you charge. Sometimes you stay up working until 2am. Some days you take off entirely for idea-generating sessions which look like really long hikes in the mountains. But you are great at what you do, and businesses are willing to pay you for it. Employee or Independent Contractor? You would be considered an Independent Contractor since you have control over when you work and with whom you work.
Scenario B: You are a marketing genius. You are the go-to person in the office for any problems that come up. You’ve hired two people to help take on some of the workload so you can have breathing space to come up with new ideas. You also come up with the team schedule. You often meet with the business owner to come up with priorities, which you relay to your team. The business owner is excited about a new client, and they’ve put you in charge of their campaign. Employee or Independent Contractor? In this case, you are an employee. You are ultimately overseen by the business owners, and they decide which clients you work with.
Resources:
