In general, an employee is someone who works for another person or organization. There is an agreement to provide services in exchange for compensation. An independent contractor is someone who contracts with another person or organization to provide services in exchange for compensation. There are many factors that determine whether someone is an employee or an independent contractor. The distinction is important and affects tax law, labor law, and immigration law.
In the United States, the IRS generally considers three factors in determining whether someone is an employee or an independent contractor: behavioral control, financial control, and the type of relationship between the worker and the company.
Behavioral control refers to the extent to which a company can direct or control how a worker does his or her job. If a company can direct or control what a worker does and how he or she does it, then that worker is likely an employee.
Financial control refers to the extent to which a company can control the financial aspects of a worker’s job. If a company can control a worker’s pay and whether or not they receive reimbursement of expenses, then that worker is more likely an employee.
The type of relationship between the worker and the company is also relevant in determining whether someone is an employee or an independent contractor. If there is a written contract between the worker and the company that spells out an employer-employee relationship, then that worker is likely an employee.
The distinction between an employee and an independent contractor can be important in several legal contexts. For example, labor laws entitled employees to many rights and protections under labor laws. IC’s don’t enjoy the same protection. This includes the right to:
- Receive minimum wage and overtime pay
- Form or join a union
- Be protected from discrimination
Independent Contractors and Workers’ Comp Benefits
Classification also affects workers’ compensation benefits.
The simple answer is no. Independent contractors are not eligible for workers’ compensation coverage.
There are a few exceptions to this rule, however. If an independent contractor is injured while working on a project for a company, the company may be held liable for their injuries if it can be shown that the company was negligent in some way. For example, companies must provide safe working conditions and proper training. Failing to do so makes them responsible for an independent contractor’s injuries.
However, even in these cases, the independent contractor would likely only be able to recover damages from the company, and not receive workers’ compensation benefits. Workers’ compensation is a system of insurance that provides benefits to employees injured on the job. The benefits can include medical expenses, income replacement, and death benefits. Workers’ compensation is typically only available to employees, and not to independent contractors.
If you are an independent contractor and you are injured while working, you may still be able to recover damages from the company you were working for. However, you will not be eligible for workers’ compensation benefits. You may want to consult with an attorney to discuss your options if you were working as an independent contractor.
For more information or to discuss independent contractors and workers’ comp with a legal expert, contact Shugarman & Mehring at 410.783.4200 or toll-free at 888.342.7200.
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