Many businesses may have multiple people working for them on a part-time or contractual basis, fulfilling needs as they arise or as particular projects come up. Generally, most employers think of these workers as independent contractors, and in many cases they may be correct. Sometimes, however, conduct on the part of an employer may actually operate to turn an independent contractor into an employee, opening up a variety of legal issues that could potentially arise for both employer and employee. As a result, it is extremely important for employers who use nominative independent contractors to be sure that they understand the laws that distinguish employees and independent contractors, and employees should know their rights in the event they are misclassified.
Employee or Independent Contractor?
The term “independent contractor” is defined by Oregon state law The law outlines three main requirements for a person to be considered an independent contractor:
-The person is engaged in an independently established business
-The person is responsible for the acquisition and maintenance of any particular license required to perform the type of labor or services at issue
-The person is free from direction and control over the means and manner of providing the services
Because the first two criteria are generally clear, many times the determination of whether an person is an independent contractor or an employee turns on the level of direction and control that the person exercises over his or her own work. If a worker is directed and controlled by his or her client, courts and state agencies may very well categorize them as an employee for all legal purposes. Some examples of direction and control can include:
-Telling a worker how to dress or act
-Setting hours for the worker
-Requiring that the worker get approval to hire or fire other people
-Implementing a training program before a worker commences a job
The Oregon Administrative Rule on independent contractors further explains the test regarding direction and control, and can be found here.
Why it Matters
Under the legal doctrine of respondeat superior, an employer can be held liable for the tortious conduct of his or her employee that occurs within the scope of employment. In plain English, this means that an employer can be sued if an employee negligently injures someone else while performing job duties.
In addition to liability arising from employee misconduct, having an employee requires that employers pay payroll taxes for their employees. In addition, employers must withhold FICA taxes from employees’ wages. There are other financial requirements as well, depending on the laws of the particular jurisdiction. The best way to ensure that an employee is correctly classified and that employers are in compliance with the applicable law is to consult with one of the experienced employment law attorneys of HKM as soon as possible.