Independent Contractor or Employee?

Don’t Miss-classify Your Employee as an Independent Contractor

MYTH: An employee is an independent contractor because they signed an independent contractor agreement.

FACT: Signing an independent contractor agreement does not make someone an independent contractor.

As a condition to being allowed to work, employers sometimes require workers to sign an agreement stating that the worker is an independent contractor. Under FLSA you are an employee if, as a matter of economic reality, your work indicates that you are economically dependent on an employer, and you are an independent contractor if you are in business for yourself. Any label that the employer gives to the relationship, even in an agreement signed by the employee, is irrelevant. Instead, what matters is whether the reality of the situation indicates that the employee is economically dependent on the employer (an employee) or is in business for themself (an independent contractor).

Similarly, for federal tax purposes, signing an independent contractor agreement does not make someone an independent contractor. It may be just one relevant fact in determining the relationship of the parties.

If you are unsure if someone should be an independent contractor versus an employee, ESC can provide guidance to determine how the person should be classified.