There are a host of factors used by the courts to determine whether a person is an employee or an independent contractor, but they all boil down to the control exerted over the employee.
The courts and federal agencies have come up with the "economic realities test." It looks at the dependence of the worker on the business for which he or she works. If a person gains a large portion of their salary from that business, chances are that person qualifies as an employee. The test also factors in such things as level of skill, integral nature of the work, intent of the parties and payment of social security taxes and benefits.
The courts ask the following questions to determine work relationship in addition to both an economic and an agency test: 1) What is the degree of control over work and who exercises that control? 2) What is each party's level of loss in the relationship? 3) Who has paid for materials, supplies and/or equipment? 4) What type of skill is required for work? 5) Is there a degree of permanence? 6) Is the worker an integral part of the business? 7) These courts also use the "right to control" test. When the hiring party controls the way work is carried out and a product is delivered, the relationship between the parties is employer/employee. If an employer does not have authority over how a party accomplishes his or her work but simply give requests an outline, the relationship between the parties is that of hiring party/independent contractor.
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