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What is the actual definition of an independent contractor?

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  • What is the actual definition of an independent contractor?

    How do workers know if they are employees or independent contractors?

  • #2
    http://payroll-taxes.com/articles/art2.html
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      Thanks for the link DAW, but that seems awefully broad and confusing and it seems it leaves it up to interpretation.

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      • #4
        This is the rules for labor matters. This must be followed if the employer is required to follow the FLSA requirements...
        To understand the labor requirements think it this way. If the employer is a hair salon they need hair styist to take care of the costumers. Therefore the hair stylist are an integral part of the business. They can not be an independent contractor. The business can not operate with out such employees. Please also keep in mind that different federal agencies may have different definitions for a particular matter. For this post if the employer is required to follow the FLSA then this fact sheet is the one the ermployer must follow...

        http://www.dol.gov/esa/regs/complian...EF=whdfs13.htm
        Last edited by ArmyRetCW3; 09-22-2007, 07:14 PM.
        ========================================

        "A veteran - whether active duty, retired, national guard, or reserve - is someone who, at one point in his or her life, wrote a blank check made payable to The 'United States of America', for an amount of 'up to and including my life.'" (Author unknown)

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        • #5
          Originally posted by ArmyRetCW3 View Post
          This is the rules for labor matters. This must be followed if the employer is required to follow the FLSA requirements...
          To understand the labor requirements think it this way. If the employer is a hair salon they need hair styist to take care of the costumers. Therefore the hair stylist are an integral part of the business. They can not be an independent contractor. The business can not operate with out such employees. Please also keep in mind that different federal agencies may have different definitions for a particular matter. For this post if the employer is required to follow the FLSA then this fact sheet is the one the ermployer must follow...

          http://www.dol.gov/esa/regs/complian...EF=whdfs13.htm
          EEEk...... :?: To me that is a bad analogy, because I remember doing work (plumbing) at a hair salon once, and I overheard the owner talking about how all the stylists are not employees, they rent out a stall to do the haircuts or whatever and they give a certain percentage to the owner of each job to the salon, and they keep the rest.
          That may be completely illegal but it sure does seem like theres lots of that kind of underground, employer/employee agreements being made under the table thing going on and nothing can be done about it.
          Although your analogy may be right on.
          In any case, if you work for a company doing work that is integral to the companies well being, Its existence, and they pay you, you are an employee.
          Right?
          Last edited by harris barnes; 09-22-2007, 08:08 PM.

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          • #6
            The situation is rather worse then article describes. That is IRS rules only. Federal DOL has different rules, and each of the 50 states can have somewhat different rules.

            I can say that the government really prefers that workers be employees, that it is in the government's financial interest that the workers be classified as employees, and that if there is uncertaintity in the classification, that the government will lean towards the employee classifiation.

            Employees or employers can submit a form SS-8 to IRS for a formal classification. Alternatively, if there is a specific worker classification in play, the OP can post the particulars and ask for opinions.

            I always liked the IRS 20-factor test, because it is comparitively easy to follow compared to the Common Law based tests. My last employer basically wrote down "yes/no" next to the question, and then had a second person see if they agreed with the classification. If 11 or more questions could be hard supported as an Independant Contractor, that is the way we went. Otherwise, the worker was an employee. Basically the government never cares if a worker is mis-classified as an employee, so the burden of proof is always on the IC classification. If the employer cannot hard support at least 11 of the factors, then the government certainly will not.

            While there is no certainty that federal or state DOL will agree with an IRS classification, then employer can claim "good faith" if they can hard support the IRS classification. The DOL's Common Law based tests are arguably even harder to quantity then the IRS tests, and arguably even more prone to the employer making convinent classifications.
            Last edited by DAW; 09-23-2007, 06:23 AM.
            "Reality is that which, when you stop believing in it, doesn't go away".
            Philip K. **** (1928-1982)

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