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Worker Classification: Independent Contractor vs. Employee

In making the determination whether to classify an individual as an employee or an independent contractor a business must consider all evidence of control or lack of control, including behavioral control, financial control, and the relationship of the parties.

Behavior control refers to the right to direct and control how the worker performs the specific tasks for which he or she was hired.

Financial control involves the level of opportunity the worker has for a profit or loss, whether or not the individual incurs unreimbursed expenses, and whether or not the individual makes their services available to others

The relationship of the parties relates to how the parties perceive their relationship or how it is expressed in a written contract. Other factors to consider are the availability of employee benefits, the right to terminate the relationship, and the permanency of the relationship.

Workers who are laid off may file for state unemployment benefits and if they have been paid as independent contractors, they will not be eligible for unemployment benefits. Having former workers file for unemployment benefits could lead to a state inquiry and IRS notification.

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