Employee or IC - the facts from the Gov't - CJR

Many employers try to save money on taxes and escape liability under employment laws by getting employees to sign Independent Contractor Agreements. There are some advantages to being an independent contractor, but most people labeled as contractors are really employees. Here are the top 11 things you need to know before (or even after) you sign an Independent Contractor Agreement:  

1. Intellectual property. If you are creating art, written work, computer programs or other creative works, then it may be an advantage to you to be an independent contractor. Generally, you own the copyright to works created as a contractor. However, be very careful when you sign an agreement. If the contract says the work you are creating belongs to the company, you are probably giving up one of the main advantages to being a contractor.

2. Taxes. As a contractor, you'll pay both halves of your Social Security and Medicare taxes. If you're an employee, the employer pays half. This is a big chunk of pay to give up, so be sure you're really a contractor before you sign. The good news is that the IRS takes a dim view of employees misclassified as contractors. There's even a form to fill out if you think you're misclassified, by which you might be able to get your employer to pay what they owe.

3. Control. If you perform services for someone and they control what you do and how you do it, you're probably an employee. An employer controls the time, place and manner of your work. That means if they watch your hours, make you come in the office, make you ask permission to take time off, or supervise your assignments, you may be an employee. Independent contractors do the work where, when and how they choose. Nobody tells them what order to do the job in, what hours to work, or when they can take off.

4. Equipment and supplies. Do they tell you what equipment to use? Where to buy it? Do they provide a desk, computer or tools? If so, that's a good indication that you're an employee. Independent contractors generally use their own equipment and supplies.

5. Assistants. If you are told who will assist you and can't choose anyone you want to help you with your tasks, then you may be an employee. Independent contractors can usually hire their own assistants, or choose to work alone.

6. Evaluations. If you are evaluated about the process, details and methods of your work, you may be an employee. An independent contractor is evaluated on results -- the end product, not the procedures used.

7. Training. If the company trains you on how they want the job done and the specific procedures to be used, then this is a good indication that you're an employee. Training for independent contractors should be minimal -- instruction on the overall results needed only.

8. Financial control. Employers will reimburse many expenses, while contractors may have to purchase their own equipment. Pay for employees is normally done by the hour, day or week. Contractors are more frequently paid by the job, although are sometimes paid hourly. A contractor will have more opportunity to make a profit or take a loss than an employee.

9. Opportunity to work elsewhere. Contractors frequently advertise and are considered free to take work from other companies. Employees usually have to work for a single employer only. If you want to be a consultant, free to work for many companies, then you're probably best off as a contractor.

10. Benefits. If the company provides insurance, sick days, vacation time, pension or other benefits, then you are likely an employee.

11. Indefinite time. If you are hired for an indefinite period of time, as opposed to working on a specific project or series of projects, then you may be an employee.

There is generally no one factor that will determine that you're  an employee. The IRS and the courts weigh all the factors and look at the total picture of your employment. If you think you are misclassified, you do have options. Just because you went ahead and signed an agreement saying you were a contractor doesn't necessarily make it so. You can talk to the employer about it if you still work there. You can also fill out that IRS form and see what happens. If you are fired for objecting to being misclassified, you may be protected from retaliation as a whistleblower.

Whether or not you are an employee affects your rights under discrimination, wage, hour, overtime, copyright, family/medical leave and other employment laws. It also affects you in the wallet, in the form of taxes, Social Security, Medicare and benefits. If you've left a company and think you might have some rights as an employee, you will probably want to contact an employment lawyer in your state to find out.