As an independent contractor, you have the right to ask a state or federal agency to review your employment status. If you think you might be an employee and have a problem with your employer regarding your salary or hours of work, click here. If you are discriminated against and would like to know if you are an employee under the Americans with Disabilities Act or Title VII, please contact the nearest EEOC office. Laws of the State. Some states may have different or more restrictive classification rules for independent contractors. Several states, such as California, use their own three-factor test, also known as the “ABC” test, which requires three main criteria to be met. Every employer should review the laws in states where they want to hire independent contractors to ensure compliance. See How do I know if a person in California is considered an employee or an independent contractor? The Department`s long-standing previous guidelines dealing with the distinction between independent workers and contractors under the RSA remain in effect. See WHDs Fact Sheet No.
13, “Employment Relationship Under the Fair Labor Standards Act (FLSA).” For more information, visit our payroll and hours of work website: www.dol.gov/agencies/whd and/or call our toll-free information and support line, available from 8.m a.m. to 5 p.m. .m. m in your time zone, 1-866-4USWAGE (1-866-487-9243). In this article, we discuss (1) the legal test to determine your status as an employee or independent contractor; and (2) why determining your status is important. 8. Does my title affect whether I am an independent contractor? No. What you are called is not important.
In some cases, employers referred to their employees as “freelancers” or contractors, but after a lawsuit, those workers turned out to be employees. First, you should have a written agreement that explains why you are an independent contractor and not an employee. The company must be willing to give you broad discretion as to how, when and where you perform your duties. You need to look at all irs and DOL factors and make sure that your agreement takes all of these factors into account. If the company has many people who do the same work as you in a company building using company accessories and equipment, with supervisors controlling your orders, even an independent contractor agreement can`t stop you from being called an employee by the IRS or DOL. 4. Why does the IRS care if I am an employee or an independent contractor? An employee can apply for unemployment benefits and receive benefits if the unemployment agency believes that he or she has been wrongly classified as an independent contractor. If the organization has misclassified the employee, it may be held liable for penalties and interest in addition to unpaid UNEMPLOYMENT PREMIUMS. See New York Uber drivers can receive unemployment benefits.
10. I receive a flat rate for my work. Does this mean I am an independent contractor? You can also contact your local paid hourly office. If you need more information about your state`s law regarding independent contractors and/or if you would like to report a potential violation of state laws, you can contact your state agency that deals with violations of wage and hourly/labor standards listed on the state government agency page of our website. Workers` Compensation Acts. The criterion for independent contractor status under workers` compensation laws varies from state to state. To learn more about the workers` compensation test in a particular state, employers can contact the state Department of Labor Relations or the state Department of Labor. Typically, you`ll need to withhold income taxes, withhold and pay Taxes on Social Security and Medicare, and pay unemployment tax on wages paid to an employee. You usually don`t have to withhold or pay taxes on payments to independent contractors. As with unemployment benefits, an employer is not responsible for employee benefits if you are an independent contractor.
Most states allow an independent contractor to qualify for employee benefits by paying separately into the state`s Workers` Compensation Fund. 45K If I get paid as an independent contractor, does that mean I have to pay more taxes? The Federal Fair Labour Standards Act (FSL) uses the “economic realities test” to determine whether a person is an employee or an independent contractor. An employer should consider a variety of factors – none of them isolated – when deciding whether or not to meet a staffing need of independent contractors versus employees. Assessing job requirements in combination with other factors allows the employer to assess whether an independent contractor meets both the employer`s staffing needs and can withstand legal scrutiny. An independent contractor works independently and is relatively free from the employer`s control. To contact the Hours of Work Division for more information or to report a potential violation by an independent contractor of the RSA, call: Services Available for the Contract: Employees generally serve an employer. Independent contractors can provide services to the general public, promote services and recruit new clients – all while working for one or more other companies. In addition, if an employer subscribes to an IRS-approved medical insurance plan that covers all employees, that plan must provide non-discriminatory coverage. If you are an independent contractor, you will need to offer your own health insurance. Incorrect classification also results in legal penalties for employers under federal and state law. First, if an employer has mistakenly classified a person as an independent contractor instead of an employee, the employer may be required to reimburse the employee for wages that should have been paid under the Fair Labour Standards Act, including overtime and minimum wage. Second, an employer must reimburse federal and state income tax withholding penalties that should have been paid to the government.
Third, an employer may be asked to make social security and health insurance payments that should have been made. Fourth, the employer must provide social benefits such as health insurance and pensions to the misclassified person. [xv] Finally, many states now impose criminal sanctions such as imprisonment and fines on a company that intentionally qualifies a person as an independent contractor. [xvi] · Competing companies and taxpayers may be forced to pay, for example, emergency medical expenses or social benefits for uninsured workers who should have been legally covered by the employer`s health or unemployment insurance. As an independent contractor, the terms and conditions of the work you perform are set out in a contract between you and the employer. Even if you are not considered an “employee” under federal labor law, you can still join a union. However, you should keep in mind that an independent contractor unit is not subject to the same privileges and guarantees as a regular union bargaining unit. .