Just because you call a worker an independent contractor does not mean the courts will. The courts are looking more and more to the employer's degree of control over and individual to decide whether they are independent contractors or in reality employees. Misclassification can give rise to liability under a host of federal and state employment laws.

According to an article in THE NEW YORK LAW JOURNAL, the IRS has entered into data sharing agreements with at least 29 state work force agencies to share the results of employment tax examinations. These arrangements will make it easier for the IRS to have visibility of potential problems in this area.

Factors used in determining whether an employee-employer relationship exist may include
•Skill level of the job provided
•Source of equipment and tools
•Location of the work done
•Duration of the relationship
•Whether or not the employer is free to assign additional projects to the contractor
•Method of payment
•Whether the activity is a part of the regular business of the employer

Other tests include the IRS "11 factor test", the "relative nature of work test", and the so called "ABC test." The most important factor in all of these seems to whether or not the employer actually controls the means and manner of the individuals work.

If you are using temporary labor or independent contractors in your business and have questions, please e-mail us or give us a call.