"Common Law" Employee vs. Independent Contractor

"Common law," as we know it, has evolved slowly over the centuries based upon judgments rendered by the courts on individual cases. The common law of employment, as it exists today is the total of all court decisions related to the question of what constitutes an employment relationship.

An employer-employee relationship exists when a person who hires an individual to perform services has the right to exercise control over the manner and means by which the individual performs his or her services. The right of control, whether or not exercised, is the most important factor in determining the relationship. The right to discharge a worker at will and without cause is strong evidence of the right of direction and control. The following factors should also be taken into consideration:

• Whether or not the party performing the services is engaged in a separately established occupation or business.
• The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal without supervision.
• The skill required in performing the services and accomplishing the desired results.
• Whether the principal or the person providing the services supplies the tools, equipment, or place of work for the person doing the work.
• The length of time for which the services are performed to determine whether the performance is an isolated event or continuous in nature.
• The method of payment, whether by the time, a piece rate or by the job.
• Whether or not the work is part of the regular business of the principal.
• Whether or not the parties believe they are creating the relationship of employer and employee.
• The extent of actual control exercised by the principal over the manner and means of performing the services.
• Whether the principal is or is not engaged in a business enterprise or whether the service being performed are for the benefit or convenience of the principal as an individual.

A written contract which claims to create the relationship of principal and independent contractor is not controlling if the practice of the parties shows that the principal retains the right of control under the common law test.

The modern tendency is to find employment when the work being done is an integral part of the regular business of the employer and the worker does not furnish an independent business or professional service relative to the employer.

CASE	FACTS	RULING
Clerical Worker	A clerical worker was held to be an employee of a certified public accountant (CPA). Below are the facts: She performed routine tasks, one day a week at a client's office using the client's equipment and supplies. She never worked at the CPA's office. She was not supervised by the CPA. She did not have deductions taken from her pay. She was given initial instructions by an employee of the CPA. The work required little skill, was continuous and was part of the regular service provided by the CPA to the client. She was paid by the hour. She provided no equipment or materials. She had no other business or occupation. She did not consider herself to be an independent contractor.	CUIAB decision P-T-404

Additional Information

To provide business owners with a clear determination regarding the classification of their workers, the Employment Development Department (EDD) is adopting a process of issuing written status determinations similar to those issued by the Internal Revenue Service. If you have workers and you are unsure whether they are properly classified, you may request that the EDD issue a written determination on the employment relationship. Please contact your local Employment Tax Development Office for more information regarding this service. The ETDOs can provide guidance on employee or independent contractor issues and information regarding upcoming employment tax seminars.

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