The classic test of whether an employer-employee relationship exists is whether the putative (assumed) employer has the right to control not just the end result to be accomplished, but also “the manner and means” by which the result is accomplished.
The IRS examines 20 different facets or factors pertaining to the parties’ relationship. No single factor or facet is determinative—the test being of the “totality of circumstance” type—but some factors, blue key symbols, are more important than others.
To define a worker as an employee, it must be determined if you can, or actually do, some or all of the following:
Instructions: You tell the worker what tools or equipment to use, when to work and how physically or procedurally to do the job.
Training: You require the worker to work alongside an experienced employee for a period of time in order to learn your system.
Integration into Business Operations: The worker must work alongside your regular staff at the same jobs or very similar jobs.
Services Rendered Personally (Key element): You require this particular worker to do the work, not his/her assistants or delegates.
Hiring, Supervising, and Paying Assistants: The worker can engage his/her own assistants only by or with your approval.
Continuing Relationship (Key element): The worker was “converted” to an “independent contractor” to work at the same job he/she previously did as an employee.
Set Hours of Work: You can demand that he/she work specific shifts and hours.
Full Time Required: The worker must work full time.
Work Performed on Employer’s Premises (Key element): The worker must come to your place of business.
Order or Sequence of Work Set: You can, or you do, set the order or sequencing of the work.
Oral or Written Reports: You require written or oral reports.
Payment by Hour, Week, and Month (Key element): You pay the worker based on time increments worked rather than jobs completed.
Payment of Business or Travel Expenses (Key element): You reimburse the worker for the same kinds of business or travel expenses for which employees are reimbursed.
Furnishing of Tools and Materials (Key element): You furnish tools, equipment, and expendable supplies.
Significant Investment (Key element): You invest in and provide facilities that are used by the worker in performing services (i.e. office, lab, workshop, or other facilities).
Realization of Profit or Loss: You cover the risk of accidents, provide insurance, cover cost overruns, and do not penalize the worker for failure to finish the project on time.
Working for More Than One Firm at a Time (Key element): You are the sole employer of record and there are no “multiple customers” to indicate that the worker owns his/her own business.
Making Services Available to General Public (Key element): The worker does not advertise or otherwise make his/her services available to the public.
Right to Discharge: You may discharge the worker “at will.”
Right to Terminate: The worker can terminate his/her relationship with you without liability.
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