Legal Tip of the Day- Employer v. Independent Contractor?

 In America


Talk Legal to Me is here to provide you with “Just the Tips of the Law.”  Today’s legal tip is Employer v. Independent Contractor.

Do you understand the differences between an employee and independent contractor? If you are an employer then it important to understand the differences before categorizing someone as either an employee or an independent contractor. In 2017 the IRS estimated that there are more than 3.4 million individuals employed as contractors rather than employees. The estimate is probably far too low as to what is the actual situation.

Why have employers moved to employing more independent contractors rather than employees?

  • The Administrative Price. The price of employment has greatly increased since 1990.  Well intentioned laws have imposed increasingly complex and expensive demands on employers.  For instance, the Affordable Care Act mandates that employers of 50 or more employees offer coverage to all employees working 30 hours per week or more, which is affordable and provides minimum essential coverage.
  • Flexibility. Employment “at will” is a myth.  It is never a simple matter to terminate an employee.  There is unemployment compensation, plant closing act, discrimination laws, and etc.  It is simply not accurate to state that any employer anywhere in the United States has the freedom to terminate an employee for no reason.
  • Cost. Employment has become more expensive. There are expenses like unemployment insurance, worker compensation insurance, and etc.
  • Anything Goes. Until very recently, the IRS and other governmental/ state agencies have been lax in enforcing employment laws. But this does not mean you should be ignorant of those laws.  So what is an Independent Contractor?

What Makes an Individual an Independent Contractor v. an Employee Under the Law?

First, it is important understand that the word “Employ” is defined, purposefully, very broadly.  The most famous definition in the labor laws is found in FSLA At. 29 U.S.C. Sec. 203 (g) and it states that “employ includes to suffer or permit to work.”  Recently, the DOL decided to apply an expansive reading to the term “Employ.” David Well issued Administrator’s Interpretation No. 2015-1 on July 15, 2015 stating, in part, that “An entity suffers or permits an individual to work if, as a matter of economic reality, the individual is dependent on the entity … The factors typically include: (A) the extent to which the work performed is an integral part of the employer’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special kills and initiative; (E) the permanency of the relationship; and (F) the degree of control exercised o retained by the employer.”

If you are an employer than these are the factors you need to consider in determining whether an individual is an employee or an independent contractor.  If you need some assistance in determining this then contact Burdick Law today at 702-481-9207 or email us at

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