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Deciding Whether a Worker is an Employee or Independent Contractor

Thomas W. Hartmann, The Hartmann Law Firm LLC, TheHartmannLawFirm.com; Tom.Hartmann@gmail.com; 908 769 6888

Employers often debate whether a person who works for them is an employee or an independent contractor. The answer has important implications as to who pays taxes, how benefits are received, and how the company-worker relationship operates.

At a very high level, courts look at the level of control the company exercises over the worker or the level of economic dependence the worker has on the company. The more control or dependence, the greater the likelihood the worker will be treated as an employee.

In the 2015 case of Estate of Kotsovka v. Liebman, the New Jersey Supreme Court outlined 12 factors to be considered in assessing whether a worker is an employee or a contractor

  • Employer's right to control the means and manner of the worker's activity;
  • Kind of work - supervised or unsupervised;
  • Skill;
  • Who furnishes the equipment and workplace;
  • Length of time worker has been with company;
  • Method of payment;
  • Way the work relationship can be terminated;
  • Whether there is annual leave;
  • Whether the worker is integral to the operation of the business;
  • Whether the worker accrues retirement benefits;
  • Whether the company pays Social Security and other taxes; and
  • Intention of the parties.

While courts may consider all the factors, the courts often focus on those most critical to the situation at hand. The "control" factor is almost always at the heart of the analysis and many of the other factors overlap or provide support for other factors. For example, "control" is supported by the concept of who supplies the equipment and the workplace, whether there is annual leave, and the level of work supervision.

Also, relationships change. So, what may have begun as a contractor relationship may alter into an employment relationship over time.

Companies should undertake a very careful analysis of this matter before just assuming someone is an independent contractor because a written agreement says so. The court will consider the agreement, but will look beyond it to find the true relationship. The wrong decision can cause financial impact, as well as legal, regulatory and compliance issues.

The Hartmann Law Firm LLC can assist in these matters to insure your business and your assets are protected. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disputes should the need arise.

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