What is the difference between an employee and an independent contractor?
Failure to properly categorize a worker as either an employee or an independent contractor could lead to significant liability.
Everyone knows that there is a difference between an employee and a general contractor. In fact, you may have some loose idea about what those two terms mean and how they compare to one another.
But not everybody knows that there are important distinctions, and failure to properly categorize a worker as either an employee or an independent contractor could lead to significant liability. Notably there are civil and criminal penalties that can be imposed by the IRS and have been outlined in both state and federal law.
When determining whether a worker is an employee or independent contractor, there are three major factors that should be evaluated: behavioral control, financial control and type of relationship.
In this video, I break down these three categories and their respective subcategories. However, none of these tests alone are determinative of an employer/employee relationship, or lack thereof. If you are an employer or a worker and are unsure of how to classify your working relationship, you should speak with an attorney.
