Do you know the difference between an employee and an independent contractor?

The basic test for determining whether a worker is an independent contractor or an employee is whether the principal has the right to direct and control the manner and means by which the work is performed. When the principal has the “right of control,” the worker will be an employee even if the principal never actually exercises the control. If the principal does not have the right of direction and control, the worker will generally be an independent contractor.

If, on the face of the relationship, it is not clear whether the principal has the “right of control,” there are secondary factors that are considered to determine the existence or nonexistence of the right of control.

Can the worker quit or be fired at any time? Is the work considered unskilled or semi-skilled labor? Is the worker paid a fixed salary, an hourly wage, or based on a piece rate basis? These are some questions that help determine whether someone is an employee or independent contractor.

The Employment Determination Guide (DE 38) is available to help business owners determine whether a worker is an employee or an independent contractor. The EDD also offers no fee Tax Seminars that teach employers and agents about employees versus independent contractors and their reporting requirements. Make sure your workers are classified correctly.

Here’s more helpful information about independent contractors:

Source: EDD

2014 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 


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