One of the most common questions we receive from business owners is “What’s the difference between an independent contractor and an employee?”
Categorizing a worker in your business as an employee or an independent contractor is an important decision, impacting minimum wage and overtime laws, employment security, worker’s compensation, and federal taxes, potential liability for employee misconduct, and the legality of non-compete agreements.
The Washington State Department of Labor & Industries uses a multi-part test to determine whether a worker is legally an employee or a contractor.
The elements considered include:
- Whether the worker has freedom to control their own work (what/when or how they complete a project);
- Whether the work has to be done at the employer’s place of business, or if it can be done at home or at the worker’s own home or business;
- Whether the worker has their own independent business license or must operate under the employer’s license; and
- Whether the worker maintains their own records of business income and expenses separate from the employer.
Ultimately, it is a business owner’s responsibility to make sure they are not incorrectly paying workers as contractors who are legally employees under the Washington State test. If an employer incorrectly pays workers as contractors instead of employees, they may be subject to fines and penalties.
If you own a business and have questions about whether your workers should be contractors or employees, you are welcome to contact Limitless Law PLLC at 360-685-0145 for assistance.