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What is the Difference Between an Independent Contractor and an Employee?

Posted in employees on August 4, 2021

Employee classification is important. In some cases, individuals are direct employees of a company, and this means they receive full benefits and coverage through workers’ compensation if they sustain an injury. However, independent contractors also make up a significant portion of the workforce in Arizona and throughout the US. Here, we want to discuss the difference between an independent contractor and an employee so that you have an understanding of what to expect in your particular employment role.

Defining Independent Contractors

Over the last decade, and in particular, since the COVID-19 pandemic began, individuals throughout the country have been introduced to the “gig economy,” which is essentially filled with independent contractors. The traditional role of an employee-employer relationship has been shifting for quite a while, but this means that we have to get used to different definitions.

It is important to properly define independent contractors. To do so, we need to look at the Internal Revenue Service (IRS) website. When working to examine whether or not a person is an employee or an independent contractor, the IRS will use a “right-to-control” test to assess the situation. Basically, this will look at who has control over the work situation, the employer, or the individual. Some questions that are asked to determine whether or not a person is an independent contractor include the following:

  • Does the employer have the right to control what the worker does and how the worker completes their job-related duties?
  • Does the employer control the business aspect of the worker’s job (including how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies)?
  • Is there a written contract that specifies the nature of the employment or benefits such as vacation pay, insurance, or a retirement plan?
  • Will the working relationship continue?
  • Is the work being performed a key aspect of the employer’s business?

A person will be considered an independent contractor if they maintain control over how they do their job and when they do it. Additionally, if the job that the independent contractor is doing for the employer is not something that falls within the usual scope of the employer’s business, then the person is likely an independent contractor.

It needs to be noted that independent contractors are not covered by employment or labor laws. This means that they have no right to many of the benefits that are available to actual employees, including the following:

  • Overtime pay
  • Medical benefits
  • Workers’ compensation benefits
  • Minimum wage

There has been significant debate over whether or not various independent contractors should be reclassified as employees. This is particularly prevalent in the debate surrounding rideshare drivers who work for Uber and Lyft, as well as Amazon delivery drivers who do not work directly for the retail giant.

Work With an Attorney

If you or somebody you care about has sustained a workplace injury in Arizona, you need to speak to a skilled on-the-job injury attorney as soon as possible. A workers’ compensation lawyer will be able to fully investigate every aspect of your injury and work to obtain the compensation you are entitled to. This will include examining workers’ compensation laws, if they apply, as well as looking into the possibility of a personal injury lawsuit if you are an independent contractor and need compensation after sustaining an injury.