How to Determine Whether a Person is an Employee or Independent Contractor?

November 18th, 2019
By: admin


Recently, Matt Roberson presented at the Auto & Transportation sectional meeting of the 2019 Virginia Association of Defense Attorneys Annual Meeting in Norfolk, Virginia, and provided insight regarding how to determine whether a person is an employee or independent contractor. This is a significant distinction since the general rule in Virginia is that the employer of an independent contractor is not liable for injury caused to another by an act or omission of the contractor.

There are certain factors under Virginia law which assist in determining the proper classification. These factors include 1) selection and engagement; 2) payment or compensation; 3) power of dismissal; and 4) power of control. See Hadeed v. Medic-24, Ltd, 237 Va. 277 (1989).

The fourth factor, power of control, is determinative. Id. The employer need not actually exercise this control as the test is whether the employer has the power to do so. Generally, a worker who performs services for an employer is an employee if the employer can control what will be done and how it will be done. The key factor is that the employer has the right to control the details of how the services are performed, even if the employee has substantial freedom of action.

By contrast, an independent contractor performs services required by an employer but is not subject to the employer’s control about how the services are performed.

Generally speaking, a worker is an employee, if his or her employer furnishes the materials and equipment needed to do the work; sets the hours of work; withholds payroll federal and state income taxes and social security taxes; provides training about how to do the work; pays by the hour, week or month instead of paying at the end of the job.

To help determine whether a worker is an employee under the common law rules the IRS has identified 20 factors that may indicate whether the employer can exercise enough control to establish an employer–employee relation. Not all the factors must be present to find an employee/employment relation but the factors are guides to use to assess the likelihood as to whether and employee is an employee or an independent contractor. It should also be noted that there are also tax consequences and penalties when an employee is wrongfully identified as an independent contractor.

For more information or questions regarding this analysis, please contact Matt Roberson at Mroberson@bmhjlaw.com.

Disclaimer

This blog and the information provided has been prepared by Bancroft, McGavin, Horvath & Judkins, P.C. (“BMHJ”) for information purposes only and is not intended nor to be construed as legal advice. This blog may contain the opinions of the members and associates of this firm on various legal issues and is not legal advice. Read More