A major issue in the workplace is the characterization of an individual as an independent contractor or as an employee. The question arises in many settings, including the payment of employment based taxes and in the payment of overtime (employees are entitled to it; independent contractors are not).
The determination is fact sensitive. However, in each instance, the same factors are considered: who has control over the how/when/where of the work? What is the length of the engagement? How frequent and regular is the work? What is the skill level of the individual and the amount of supervision and the amount of business expenses paid by the worker?
Although no single factor is determinative, control over the performance of the work is typically the first factor reviewed.
Consider this case: After Hurricane Katrina, massive infrastructure repairs took place in the South. This included the telecommunications systems. A telephone company had to restore telecommunication lines. It retained two individuals to provide cable splicing work. The workers provided the services for 11 months. They were required to work 12-hour days on a schedule of 13 days on and one day off. They were paid an hourly rate of straight time (never overtime) for all work.
The workers went each morning to a phone company location to receive assignments. Phone company supervisors told them to follow certain general specifications and phone company representatives checked on their progress.
The workers were not trained by the phone company and decided on their own how to perform the assigned jobs. They provided their own tools, which were worth $50,000 and paid most of their insurance expenses.
The overriding issue was a wage and hour one. If employees, the workers were entitled to considerable amounts of unpaid overtime. If independent contractors, they were not.
If you apply the various factors against the facts, there is no clear answer.
An argument can be made for either position. The court which decided the case primarily focused on one factor: The court held that workers cannot be considered independent contractors when, as a matter of economic reality, they were dependent on the employer, rather than being in business for themselves.
Even though there were several facts pointing to an independent contractor status, the court decided that the workers were employees because the relationship lasted 11 months and their opportunity for profit or loss during this time was controlled by the phone company. As a practical matter, the workers could have taken on almost no other work during those 11 months, just like the other employees of the phone company.
Opinions are solely the writer's. James Jorgensen practices law at Hoeppner Wagner & Evans in Valparaiso.