Contractor vs. Employee: What’s the Difference?

Contractor vs. Employee What’s the DifferenceIndependent contractors are flooding the workforce in today’s job market. As we move away from traditional employee structures to a more flexible work environment, it is crucial to understand exactly what a contractor is and how it differs from a typical employee. Before accepting one of these roles, be sure to obtain an IL Contractors Insurance policy to protect yourself from potential injury or loss on the job.

Although there is no definitive term for what constitutes a contractor, let’s examine the basic principles for categorizing the worker in reference to common law principles, the Fair Labor Standards Act, and decision of courts.

Common Law Principle: Legal Zoom states that a worker is an independent contractor if they provide their own equipment and tools, if the worker can be discharged at any time, if the worker controls the hours of employment, and if the work is temporary. In short, the nature of the work will define the title of the worker. Determining whether the work is essential to the business and if it’s an ongoing job will also clarify your title.

Fair Labor Standards Act & Courts: This interpretation of employee vs contractor reflects the courts and federal agencies’ perspective. Using the “economic realities test,” the relationship of dependency of the worker and the business is determined. For example: what portion of the worker’s salary comes from that company? Who has the primary control over the work? Who pays for materials? What degree of permanence is provided? The courts state that if the company controls how the work is executed and pays for materials, the worker is an employee. However, contractors reserve the right to perform the work their own way and exercise most of the control.

Using these guidelines will help clarify your work relationship and respective title. Myers Insurance Group is committed to solving your personal insurance requirements. For more information about which insurance coverage is right for you, please contact one of our specialists today at (855) 534-5707.

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