California HR Compliance: IRS Factors for classifying Independent Contractors

» Articles » Employment & Labor Articles » Article

January 21, 2015

The factors used by the IRS to determine independent contractor status are extensively discussed in the IRS Training Manual on Worker Classifications.2  The IRS factors are more comprehensive than those used by the EDD and include the following:

(a) No instructions. An independent contractor does not receive instruction as to how to accomplish the job

(b) No training. The company does not provide training to an independent contractor

(c) Right to delegate. An independent contractors is hired for a specific result. It should not matter who completes the work.

(d) Service not essential to the hiring firm. A company should not depend on the work of independent contractor for its business to succeed.

(e) Sets own work schedule. An independent contractor determines his or her own schedule

(f) Not long-term. The contracting relationship should not be long term. It can be frequent or repeating, but at irregular intervals.

(g) Has time to perform other work. Independent contractors should be free to work for whomever they please. A requirement of fulltime status often establishes an employer-employee relationship.

(h) Right to control their own workers. Independent contractors are free to hire and fire their own assistants.

(i) Job location. An independent contractor position should not necessarily require that the contractor work on-site at the company's location.

2 See http://www.irs.gov/pub/irs-utl/emporind.pdf. Note, while all states have classification tests based on common law and/or rules promulgated by state-specific equivalents to California's EDD, the IRS factors are a federal standard and are applicable to workers in all jurisdictions. Companies that retain contractors who travel significantly or who perform services in a state different from the employer should look to the IRS factors in evaluating worker status.

More Employment & Labor Articles

About the author:
- Partner with Hanson Bridgett LLP - Focuses on employment, labor and benefits litigation, with an emphasis on defense of complex employment disputes - Conducts wage and hour audits and advises on compliance - Substantial class action experience in wage and hour, pension and retiree health cases - Represented employers in the transportation, life sciences, utility, manufacturing, health care and financial industries, as well as public sector clients - Successfully litigated a number of wage and hour class actions involving alleged violations of meal and rest breaks, and alleged misclassification of employees as independent contractors - Currently litigating an independent contractor, alleged misclassification class action case in the transportation industry - J.D. degree, cum laude, University of California, Hastings College of the Law; M.A. degree, University of Minnesota; B.A. degree, University of Minnesota

The material appearing in this web site is for informational purposes only and is not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. The information provided herein is intended only as general information which may or may not reflect the most current developments. Although these materials may be prepared by professionals, they should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

The opinions or viewpoints expressed herein do not necessarily reflect those of Lorman Education Services. All materials and content were prepared by persons and/or entities other than Lorman Education Services, and said other persons and/or entities are solely responsible for their content.

Any links to other web sites are not intended to be referrals or endorsements of these sites. The links provided are maintained by the respective organizations, and they are solely responsible for the content of their own sites.