Who is Considered an Independent Contractor

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How do I determine if a business of my size is covered by the EEO laws - By Lu Vorise Dahlman

Independent Contractors

Classifying a person as independent contractor usually reduces the small business owner’s exposure under laws and regulations governing the employment relationship and requires a 1099 contract to be in effect.

An independent contractor is not legally considered an employee of a small business however; because of this classification, the rights and responsibilities that the small business owner has toward the independent contractor are different for those responsibilities he or she has for individuals classified as full or part time employees of the business. For example, non discrimination laws apply to the employer and its employees, but not to its independent contractors.

In exchange for using the advantages independent contractors provide, the employer substantially loses the rights to control the contractor. While the employer can still control and expect results however, the employer cannot dictate where, when, or how work is to be done. Thus, the employer loses control over the work processes, tools, and work schedules by which the work is performed. The demarcation between what constitutes an employee versus an independent contractor can be ambiguous. For example a person is more apt to be considered and independent contractor when:

•A 1099 contract is involved and defines the relationship between the business owner and the contractor.
•Submission of an invoice for payment for services rendered to the business owner for payment.
•Usually has established a Federal Employer Identification Number (FEIN).
•Responsible for his or her payroll taxes
•Work on a project with a definite completion date.
•Setting one’s own hours
•Possessing a high degree of skill
•Using ones own tools, materials and office
•Working on relatively short projects

The above examples are based on common law interpretations and on a list of 20 criteria used by the Internal Revenue. Misclassification of people as independent contractors can result in substantial tax liabilities and fines for the small business owner. When in doubt always consult an employment attorney.

Source: Staffing Organizations and www.eeoc.gov

MZ LV

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About the Author: Lu Vorise Dahlman

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Lu Vorise Dahlman is Founder and President of The LVD Group, where she coaches and recruits individuals and groups with creative and empowering techniques, rare to Corporate America. She is an out of the box thinker who encourages others to look deep within to discover their inner talents and core strengths. She has a contagious energy, which draws out the best in her clients. Throughout Lu Vorise's professional career, she has held various consulting assignments: Sr. HR Recruiting Consultant to Allstate Insurance, Towers Perrin ISR and United Airlines. Lu Vorise can be contacted at: lv@thelvdgroup.com or via her website: www.thelvdgroup.com
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