I’ve written on this blog a few times that one of the ways an employer, usually a trucking company but not always, tries to screw you out of Illinois workers’ compensation benefits is to call you an independent contractor when you are really an employee. If you aren’t an employee then you can’t get benefits.
The IRS recently issued some guidelines on this issue because they lose a ton of money over it too.
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done. Whether an individual is an independent contractor or employee is unique to each case, but the following is what the IRS said that they look for:
To better determine how to properly classify a worker, consider these three categories – Behavioral Control, Financial Control and Relationship of the Parties.
Behavioral Control: A worker is an employee when the business has the right to direct and control the work performed by the worker, even if that right is not exercised. Behavioral control categories are:
* Type of instructions given, such as when and where to work, what tools to use or where to purchase supplies and services. Receiving the types of instructions in these examples may indicate a worker is an employee.
* Degree of instruction, the more detailed instructions may indicate that the worker is an employee. Less detailed instructions reflects less control, indicating that the worker is more likely an independent contractor.
* Evaluation systems to measure the details of how the work is done points to an employee. Evaluation systems measuring just the end result point to either an independent contractor or an employee.
* Training a worker on how to do the job — or periodic or on-going training about procedures and methods — is strong evidence that the worker is an employee. Independent contractors ordinarily use their own methods.
Financial Control: Does the business have a right to direct or control the financial and business aspects of the worker’s job? In looking at this factor consider:
* Significant investment in the equipment the worker uses in working for someone else.
* Unreimbursed expenses, independent contractors are more likely to incur unreimbursed expenses than employees.
* Opportunity for profit or loss is often an indicator of an independent contractor.
* Services available to the market. Independent contractors are generally free to seek out other business opportunities.
* The method of payment on the project. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time even when supplemented by a commission. However, independent contractors are most often paid for a job by a flat fee.
Finally, the Relationship between the parties may determine the classification: The type of relationship depends upon how the worker and business perceive their interaction with one another. This includes:
* Written contracts which describe the relationship the parties intend to create. Although a contract stating the worker is an employee or an independent contractor is not sufficient to determine the worker’s status.
* Benefits. Businesses providing employee-type benefits, such as insurance, a pension plan, vacation pay or sick pay have employees. Businesses generally do not grant these benefits to independent contractors.
* The permanency of the relationship is important. An expectation that the relationship will continue indefinitely, rather than for a specific project or period, is generally seen as evidence that the intent was to create an employer-employee relationship.
* Services provided which are a key activity of the business. The extent to which services performed by the worker are seen as a key aspect of the regular business of the company.
Classifying an employee as an independent contractor with no reasonable basis for doing so makes an employer liable for employment taxes. Certain employers that can provide a reasonable basis for not treating a worker as an employee may have the opportunity to avoid paying employment taxes.
That’s a lot of legal speak right there, but in a nutshell just because your employer calls you an independent contractor doesn’t mean that you are one. We’ve helped people with work injuries who were working as an employee for years only to be told one day that they were now independent contractors and would get a 1099. Nothing changed in their job duties so of course when push came to shove we were able to succeed on their case.
Bottom line is that this can seem confusing, but if you want a FREE consultation to see if you have a case, contact us at any time. We are always happy to speak with you and will always give a direct, honest legal opinion.