Independent Contractor Compliance Blog - by Collabrus™

Often times, clients want a quick, easy solution to the IC compliance question.

Unfortunately, a simple answer won’t work when it comes to who is an employee or independent contractor.  There is NO universal formula where “if you do this you have an IC…”

Common law is too complex for an easy answer

In the previous article I used the example:  “Does s/he have her/his own equipment?” to demonstrate how complex common law can become for just that single, seemingly simple question.  There are at least twenty such factors to consider in determining who is an employee or IC and each of them have “Drop Down” considerations.

How can someone learn all the “Drop Downs?”  Maybe attend a seminar…

The “How to Make/Be an IC” seminar will make you dangerous.

You can find them all over: “Employee or IC?“  They are given by law firms, private consulting companies and even the government itself.  Some charge a fee, some are free.
It doesn’t matter if these seminars last one hour, four hours, all day or even two days, they will at best only let you know how much you don’t know.  If you make an IC versus employee decision based on what you learned at one of these seminars it is likely your company will get into trouble.

The really good judges, attorneys and government auditors, who know how to apply the rules in real life, have been doing it for years.  They have fine tuned their expertise with the experience a thousand of cases.  You can’t get that wisdom in a seminar.

Here’s an example.

Direction and Control is the Primary Factor. That’s pretty straight forward, right?

Most people learn in these seminars that the right to Direct and Control the Manner and Means (or details) of the job is a primary factor in considering if someone is an employee or an IC.  If the primary company (or client) has the right to direct and control the details of the work of the individual then that points to an employee.  If not, then it points to an independent contractor.

Well it depends even for the Primary Factor.

First, it’s who has the right to direct and control - not if control is actually exercised or not. 

For example, let’s look at “Can set his/her own hours,” which is one “Drop Down” of this factor.  You may have flextime for your workers, so they can come and go as they please to fit their personal needs and commuter patterns and based on their judgment about workloads and deadlines.  However, that does not mean you have given up the right to insist they attend a certain meeting or put in a minimum number of hours or that if circumstances change you have given up the authority to require they be at the office by 8 A.M. on a given morning.  You may not exercise this authority, but that doesn’t mean you don’t have the authority. There are many other “Drop Downs” for this factor, depending on the circumstances.

Second, another possible “Drop Down” could be, “Who is really requiring the specific direction and control?“  For example, there are some professions where the government (city, county, state, or federal) has rules controlling how certain jobs must be performed.  It is really the government that is telling the business to tell the worker what to do.  You can find examples of this in:

1. Construction
2. Medical
3. Real Estate
4. Trucking and Transportation
5. Industries with government contracts

There are other examples.  The point is the company has no choice but to enforce the rules or be fined and possibly risk the operations of business for non-compliance.  So when the company enforces those rules, it is not exercising its right of direction and control but the government’s, which means those instructions are probably not proof either way of the worker’s status as an employee or IC.

No single factor will make the difference

Because of the ambiguity caused by the “Drop Downs” and the weighting of factors specific to each case (covered in the previous article), no single factor will ever determine if someone is an employee or an IC.  Latching onto a single factor, excluding the others, will always be a formula to be wrong.  As many judges have written in their decisions, “you must consider the whole picture.” 

I would add, “Don’t underestimate the level of detail that must be considered.”

Not for Weekend Warriors

The point is it takes someone who has been through the experience of thousands of these cases, someone who knows the proper weighting for each factor in each specific case and can apply them in real life.  In other words a true expert.

I recommend you call an expert to help you do it right. Call Collabrus.