UI and Independent Contractors

If you were hired to perform services as an independent contractor, you may still be considered an employee under the law and may be entitled to unemployment insurance benefits. Whether the relationship is one of employer-employee will depend on the degree of supervision, direction and control the employer has over the services.

All factors must be examined to determine the degree of supervision, direction and control in the employer-employee relationship. An employer controls what will be done and how it will be done, i.e., the manner, means and results.

How an individual is compensated is another indicator of worker status. Employees typically are paid a salary, an hourly rate of pay or a draw against future commissions with no requirement for repayment of unearned commissions. Employees may also receive certain fringe benefits, including an allowance or reimbursement for business or travel expenses.

The nature of the services performed is also significant in determining if a worker is an employee or an independent contractor. Unskilled or casual labor is usually employment because such services are typically subject to supervision. However, even professionals such as doctors and lawyers who have considerable freedom in the performance of their duties can be determined to be employees if they are subject to significant control.

An employment relationship may exist if the employer controls important aspects of the services performed other than results and means. For example, a referral agency usually does not directly supervise the individuals it refers for assignments, but it could be their employer if it controls such important aspects of the services as client contact, the individual's wages and billing and collection from clients.

THE INDEPENDENT CONTRACTOR RELATIONSHIP

Independent contractors are free from supervision, direction and control in the performance of their duties. They are in business for themselves, offering their services to the general public.

Indicators of independent contractor status may include:

• having an established business
• advertising in the electronic and/or print media
• maintaining a listing in the commercial pages of the telephone directory
• using business cards, business stationery, and billheads
• carrying insurance
• maintaining a place of business and making a significant investment in facilities, equipment and supplies
• paying one’s own expenses
• assuming risk for profit or loss in providing services
• determining one’s own schedule
• setting or negotiating own pay rate
• providing services concurrently for other businesses, competitive or non-competitive
• being free to refuse work offers
• being free to hire help

If an employer-employee relationship exists, it does not matter how the relationship is described by the person engaging the services. For example, if an employer issues individuals a 1099 form rather than a W-2 form, the workers may still be considered employees. Even if the workers sign a statement claiming independent contractor status and waiving any rights as employees, or if they are required to obtain a DBA in order to work for that employer, those individuals may still be considered employees under the law. The Unemployment Insurance Law provides that no agreement by employees to waive their rights under the law is valid.

Certain types of services are excluded or covered by statute regardless of the degree of direction and control. For more information, click here.