Independent Contractor or Employee?


An employment question that often comes up for small businesses is the classification of the people working for them. Many companies improperly classify employees as independent contractors, and this leads to problems with tax law, unemployment insurance, and other labor issues. The Tennessee Department of Labor has published the following list that is a good place to start to help determine whether an individual should be an independent contractor or an employee:

Independent Contractor
• Free from direction and control
• Has necessary skills and training to complete job
• Has a business location
• Performs services for multiple customers
• Sets own hours
• Determines own price for contracted services
• Not eligible for employee benefits
• Provides equipment and tools used to complete job
• Supplies materials needed to do job
• Personally liable for errors and/or accidents
• Files self-employment taxes
• Has right to hire and fire workers
• Must legally complete each contract

Employee
• Means and manner of work are (or can be) controlled by employer
• May be trained by employer to perform job
• May work at employer’s business location
• Works for one employer, may serve that employer’s customers
• Hours set by employer
• Accepts wage, salary, or commission determined by the employer
• Employer may provide and control equipment and tools
• Employer may purchase materials and supplies
• Employer liable for employee errors and/or accidents
• Is hired and can be fired by employer
• May quit working for an employer at any time
• Employer may require specific attire to be worn while at work such as a uniform or shirts with company logo


About Luke D. Bottorff

Luke D. Bottorff is the founder of Bottorff Law, where he focuses his practice on creating custom legal solutions for small business owners and entrepreneurs.