Many employers use the services of “independent contractors” to do certain types of work, work that is usually very specialized, yet not needed on a long-term or permanent basis. For instance, someone opens up an office or even a production facility and hires an independent contractor to put together the companies IT systems, which will cater to the company’s specific needs. When the job is completed, they go their separate ways.
Some companies use independent contractors for relatively short periods (a couple of weeks), while others may use an independent contractor for months and even longer.
So the question becomes, when does this contractor cease being an independent contractor and becomes an employee of the company. According to California’s Unemployment Insurance Code (§§ 621 to 623), the fine line between contractor and employee rests heavily on the question of whether the employer controls the “manner and means” of the desired result of the contractor’s work.
In a nutshell, controlling the “manner” of a contractor’s work means the employer tells the contractor how to do the job. The key word here is how. Obviously, the employer must tell the contractor what he wants done, but the how is the business of the contractor. The “means” of a contractor’s work relates to the tools and logistics used in the task. Do the tools belong to the employer or contractor?
Most importantly, only the existence of control is what matters, regardless of whether or not control is exercised by the employer.
Section 4304-1 of the California Unemployment Insurance Code lists 10 factors that help determine an employee/employer relationship or if “control” exists. They are:
- Whether or not the one performing the services is engaged in a separately established occupation or business.
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of a principal without supervision.
- The skill required in performing the services and accomplishing the desired result.
- Whether the principal or the person providing the services supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the services are performed to determine whether the performance is an isolated event or continuous in nature.
- The method of payment, whether by the time, a piece rate, or by the job.
- Whether or not the work is part of the regular business of the principal, or whether the work is not within the regular business of the principal.
- Whether or not the parties believe they are creating the relationship of employer and employee.
- The extent of actual control exercised by the principal over the manner and means of performing the services.
- Whether the principal is or is not engaged in a business enterprise or whether the services being performed are for the benefit or convenience of the principal as an individual.
So, is your independent contractor really an employee in the eyes of the law. The answer to this question can have profound implications for you company. You say you have a written contract with your independent contractor, well that may be a good idea, but it will probably not trump unemployment law if determined that control exists.