Independent Contractor Compliance Blog

Why does providing a computer, email, telephone, supplies, materials, tools, software applications, workspace, or other material assistance tend to make someone an employee?

The short answer: Because those are the normal items and expenses that an independent contractor (or business) traditionally pays for.  Employees expect to receive this apparatus as part of the employment relationship.  Independent Contractors should not.

There are actually two primary legal and logical explanations why.

1. Two important characteristics of an Independent Contractor (or business) are the Financial Investment and the Risk of Loss.  IC’s, and other independent businesses, have a monetary investment in their business (time spent working doesn’t count for this factor).  If things don’t go well they can actually spend more money than they make.  An employee doesn’t typically have this risk of loss or investment in assets.
2. When someone provides the material, supplies, work space and other tools (such as proprietary hardware or software) to perform a job, they have an implied right to control how those assets are utilized in doing the job.  That, in turn, implies they have the right to direct and control the way the job is done, which is another trait of an employment relationship-the Right to Direct and Control the Work.

Therefore, the more supplies, materials, tools and workspace, etc. someone is provided to perform the work, the more they look like an employee.

Please remember, no single factor alone will decide the status of a working relationship, and factors can be weighted differently depending on the profession and the circumstances of the project.  That’s why it takes a true expert to make these calls with the confidence of being correct.