Lori, of Words On The Page, asked herself this very question last week when she was told that she had to wait by the phone at certain times on certain days. She felt that this request went above and beyond the normal responsibilities of a freelancer.
What do you think? Was the request to remain by the phone above and beyond what an independent contractor should be expected to do?
For workers living in the United States the IRS has established some guidelines for determining whether someone is a contractor or an employee. You can view the guidelines for yourself at www.IRS.Gov, Publication 1779.
Here's my overview of what U.S. law says. To determine whether someone is an employee or contractor the government looks at three areas: behavioral control, financial control, and relationship of the parties.
- Behavioral control has to do with how much control the company exercises over how and when the worker performs the work. The more control a company has over these issues, the more likely it is that the worker is an employee. Behavioral control is the issue Lori faced when her employer told her to wait by the phone at certain times.
- Financial control deals with whether or not you can control how you operate your business. For example, when I was an employee of a company I took every project that was assigned to me. I couldn't get additional projects to earn more money, nor could I turn projects down. This area also examines whether the worker has an investment in their work.
- Relationship deals with whether or not a worker receives benefits from the company (indicating employment) and whether or not there is a contract in place that specifies the relationship between the worker and the company.
Why is the distinction important? It's important in the United States because of the tax laws. Tax law states that employers must withhold certain taxes from pay and provide a W-2 Form to the employee showing the withholding. Contractors, on the other hand, are responsible for paying their own taxes and made need to make estimated tax payments during the year.
How is this distinction made in other countries? I'd be interested in hearing from you.
Note: The above information does not constitute tax advice. If you need specific tax advice consult an accountant or an attorney specializing in tax law.
Additional Resources: Freelancer or employee? Which one are you?
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This problem is starting to become an issue in the real estate appraisal industry. It's very competitive, and Appraisal management companies (go-betweens between banks and appraisers) are becoming so demanding that many appraisers feel they've stepped over the line. Many try to dictate WHEN you do the appraisal, what you can wear, who you can take with you, WHO in your office does it, how long you have to get it back to them, the exact words you can use on any given line of the appraisal (this because they're illegally selling your data to data mining companies), and even what you're allowed to say to the homeowner.
However, they're so powerful in the industry...you don't work for them, you don't work. Most appraisers give in. Only a few have the guts to stand up and say, HEY you're making me an employee, I want health insurance. :D
Posted by: Kathy | July 17, 2007 7:07 AM | Permalink to Comment