LEGAL Dawn L. Drellos-Thompson
by
Attorney
Know the Difference between an Employee and an Independent Contractor
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n January 2010, Wisconsin passed a law that provides for a mandatory penalty of $25,000 per employee violation against construction employers who willfully attempt to evade the requirements of properly classifying a person as an employee. This law is in response to businesses that attempt to avoid paying payroll taxes or worker’s compensation and unemployment benefits by intentionally misclassifying employees as independent contractors. This practice is unlawful and will invoke serious financial penalties for both the business as well as personal liability for the business owner or manager.
empresario
Wire • ISSUE MARCH 2012
The primary difference between an independent contractor and an employee is how much control and supervision the business has over the individual’s work. To determine this, several factors should be considered, such as:
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1) Does the individual advertise or hold himself/herself out as being in business or offering services to the general public; 2) Does the individual maintain his/ her own office and use his/her own equipment and materials to perform the service; 3) Does the individual have multiple contracts with one or
more businesses to perform specific services; 4) Does the individual incur the main expense relating to the services that he or she performs; 5) Does the individual have an obligation to redo work that was performed unsatisfactorily for no additional compensation; 6) Do the individual’s services directly relate to the business using the services; 7) Will the individual realize a profit or loss while performing his/her work; 8) Does the individual have reoccurring business liabilities or obligations; and 9) Is the individual economically dependent on the business for the services performed. The most common types of independent contractors are
(generally): owner-operated truck drivers, home/office cleaners, accountants, brokers, plumbers, painters, landscapers, electricians and attorneys. The Wisconsin Fair Employment Act (WFEA) uses an economic realities test that also focuses on the individual’s control over the independent contractor’s work. The WFEA’s test considers whether the working relationship is short-term or indefinite; the skill level of the independent contractor; the independent contractor’s financial independence relative to profits or losses incurred; and investment in equipment. Financial independence may also mean that the independent contractor pays: rent; utilities; equipment maintenance and supplies; the wages and salaries of assistants; his or her own travel expenses; and leases or depreciates