Work it Out Blog

Employee or Independent Contractor?

Jan 25, 2016 by David T. Andrews

Having independent contractors instead of employees significantly reduces your labor costs – no employer-side taxes, fringe benefits or overtime to worry about.  However, this incentive to reduce costs often leads to the misclassification of true employees which may result in a wage and hour lawsuit for overtime violations.  It could also create problems with state agencies like the Ohio Department of Job and Family Services (ODJFS) and the Ohio Bureau of Workers’ Compensation.   How do you avoid this problem? 

First, having a written “contract” that claims an independent contractor relationship is not enough to establish such a relationship.  Instead, courts determine whether an employer-employee relationship exists based upon whether the employer controls the manner and means of the labor.  This “right to control” is typically the most important factor courts look to when determining which classification is applicable.  Courts and state agencies also look to other factors when making this final determination.  Below is a list of twenty questions provided by the ODJFS that may help you in determining whether you have an independent contractor or an employee:

  1. Who directs or controls the manner or method by which instructions are given to any individual(s) performing services?
  2. What training is required for individual(s) performing services?
  3. How are the services provided integrated into the regular functions of the employer?
  4. By whom does the business require that services be provided?
  5. Who hires, supervises and/or pays the individual(s) performing services?
  6. What type of relationship exists between the business and the individual(s) performing services which contemplates continuing or recurring work, even if not full time?
  7. Who sets the time (hours) during which the individual(s) services are to be performed?
  8. How much time does the business require the individual(s) performing services to devote to the business?
  9. Where does the business require that work be performed?
  10. Who sets the order of work the individual(s) follow while performing services for the business?
  11. What type of reports, oral or written, does the business require the individual(s) performing services to submit?
  12. How are the individual(s) performing services paid?
  13. Who pays expenses for the individual(s) performing services?
  14. Who furnishes the tools and materials used by the individual(s) performing services?
  15. What investment do the individual(s) performing services have in the facilities used to perform the services?
  16. What is the profit or loss to the individual(s) performing services as a result of the performance of such services?
  17. Do the individual(s) performing services also perform similar services for other businesses? If yes, for whom?
  18. How do the individual(s) performing services make their services available to the general public?
  19. Does the business have the right to discharge the individual(s) performing services? If, yes, in what manner?
  20. Do the individual(s) performing services each have the right to end the relationship with the business, without incurring liability pursuant to an employment contract or agreement? If yes, how?

If you have independent contractors, you should review this list to determine if their classification is correct.  Otherwise, their misclassification could cost you. For questions regarding independent contractors and other employee classifications, please contact your Day Ketterer attorney at info@dayketterer.com or 330.455.0173.

The content of this blog is for informational purposes only and is not intended as legal advice for any purpose. This blog is not intended to present an exhaustive summary of all applicable laws, or to take the place of legal advice.  If you have any questions regarding the law, please contact us for assistance.