EMPLOYMENT LAW:  INDEPENDENT CONTRACTOR

By:  Paul D. Gibson

Whether a particular person is an employee or an "independent contractor" can be significant for a number of reasons. For instance, independent contractors do not count as employees for purposes of determining whether there are a sufficient number of employees to require coverage under employment statutes. Distinguishing between employees and independent contractors requires analysis of all the facts of the relationship that results in the product or service provided by the business.

The independent contractor test under federal law:

The tests applied under the FMLA and the FSLA are broader than those tests applied to make the same determination in the context of the ADA, the ADEA, and any claims brought under Title VII of the Civil Rights Act. Although the ultimate determination of whether one is an employee or independent contractor may vary from one statutory scheme to another, there are two common elements among the various tests. The first area of focus is "what degree of control does the hiring party have over factors such as how and when the hired party does the work?" The second area of focus is one of the hired party is economically dependent upon the hiring party and does the hired party participate in the risk and exert control over revenues he derives from the relationship?"

Here are some of the factors relevant to the inquiry of whether one will be determined to be an independent contractor or an employee:

1. The skill required to perform the work;
2. The source of the tools and instrumentalities;
3. The location of the work;
4. The duration of the relationship between the parties;
5. Whether the hiring party has the right to assign additional projects to be hired party;
6. The extent of the hard party's discretion over when and how long to work;
7. The method of payment;
8. The hired party's role in hiring and paying assistants;
9. Whether the work is part of the regular business of the hiring party
10. Whether the hiring party is in business;
11. Whether the hiring party provides employee benefits; and
12. The tax treatment of the hired party.

The independent contractor test under Louisiana law:

The "right to control" the means of performing the work is the most prominent factor considered by Louisiana courts. The decisions of the courts are relatively inconsistent with regard to key factors to be considered and the manner in which they evaluate them. However, the cases suggest that the courts must often look to whether the worker is economically dependent on the hiring party. Two other frequently considered factors are whether the worker performs work only or primarily for the hiring party and whether the hired party is required to follow detailed policies and procedures in performing the work.

The independent contractor test under Texas law:

Under the Texas common law test, a worker is an employee if the hiring party has the right to direct or control the worker, both as to the final results and as to the details of when, where, and how the work is done. It does not matter if the hiring party does not actually exercise such control; if the hiring party has the right to control the details of the work, an independent contractor relationship may not exist. The more control the hiring party has over a worker, the more likely it is the worker is an employee. Likewise, the worker’s title does not define the relationship. Also, if the hired party arrives at a set time every day, is trained by the hired party, uses the boss's tools or equipment, and is paid by the hour, week, or month, he most likely is an employee.

On the other hand, the more a worker acts like an independent business enterprise, the more likely the worker is an independent contractor. For example, if the worker actually invests money and takes on risk in the venture, the relationship is more likely to be defined as that of an independent contractor. Someone who works for more than one company at a time, sets his or her own hours, and realizes a profit or risks a loss probably is an independent contractor.

Whether an independent contractor relationship exists depends on the particular facts and circumstances of each case in both the federal and state contexts. The wise employer will consult counsel in order to properly structure these relationships to best serve and protect its business.