There are two tests which are commonly used to decide if a worker is really an independent contractor. By reading through both sets of questions, many workers will get a good idea if they are misclassified.
Economic Reality Test (Fair Labor Standards Act)
This test is used by the Department of Labor to decide if the worker deserves labor rights, including the right to overtime. It tends to classify more workers as employees. The "economic reality" tests whether a contractor is an independent business person or the employer controls the workers' ability to make money. The answers to all the questions are looked at together to decide whether the worker is an employee or independent contractor.
- Who owns and controls the place where you work and equipment you use?
- How much and what kinds of control the company has over your work?
- Can you make more profit or lose money depending on how you do the job?
- Is independent initiative, judgment and planning necessary for the success of your job?
- How much is your work a part of the company's business?
- How permanent is your relationship with your boss?
- How dependent are you on the employer for continued work?
Right to Control Test (IRS Test)
Basically, this test is about how much the worker controls his/her own work. (Employees typically follow instructions about how, when, and where they work.) The answers to all the questions are looked at together to decide whether the worker is an employee or independent contractor.
- Does the employer provide training and tell workers how they want work done? Contractors set their own hours and decide how to do their work.
- Is the job usually done under supervision? If a worker is supervised by the company, she doesn't really have the authority to decide how to get the project done.
- Do you do the same work for more than one company? Contractors often sell their services to more than one company and may subcontract or have another person do the work.
- Is the work you do part of the regular business of the employer? Contractors often do work that is not part of the company's business -- repairing a roof at a store, for example.
- How much skill does the job take - does it require a specialist? Jobs that don't take special skills are more often done by employees.
- Who provides the tools and equipment to do the job - you or the employer? Contractors are more likely to have their own tools to do the work.
- How long have you had this same job? The longer you have a job, the more it looks like an employment relationship.
- Does it look like an employer/employee relationship? Employees can quit or be fired at any time. "Indefinite relationships" (when there is no end-date for your job) are usually employment relationships. Contractors usually contract a certain period of time -- for a job or project.
- How are you paid for your work? Employees are paid by the hour or salary. Employees get paid every week, two weeks, or month. Contractors are usually paid by the job or project in lump sums (although there are sometimes other payments, like commissions).