As we discussed in class early on in the semester, we looked at the differences between Employees and Independent Contractors. We looked at the pros and cons of each side, and looked at the four tests that one can look at to help determine the status of an individual. For the purpose of this post, we will briefly touch on those points before we break down a few factors of a contract that need to be addressed when drafting them for each type of individual.
When looking at both groups of people, there are four tests that can be administered. The first is the Control Test. The Control Test looks at the individual's independence when it comes to their work. If they have full control over what they are doing with their jobs, they are more likely to be an Independent Contractor.
The second test is the Integration Test, and this looks at the day-to-day operations of the individual. It looks at how integral their work is to the daily operations of the organization. If they are an employee, it's likely that their work is more integral to the day-to-day operations as opposed to those of an independent contractor. The third test is the Economic Reality Test. This looks at the control the individual has over various facets of their work, including owning their own tools and the financial risk. An independent contractor would own their own tools and would take on more financial risk than an employee would, a they work on their own.
The fourth and final test is known as the Specific Result Test. This specific test looks at the work that the individual does, and whether or not it is time-specific or an ongoing project. Independent contractors would find themselves in the category of time-specific projects, as they are usually hired to complete projects in a set time period.
Looking at these four tests will help to determine whether or not the individual is considered an employee or an independent contractor. Determining the status of an individual will play a big factor in the wording and structuring of their contract with the organization. Below, I will identify three different areas and briefly discuss how each category factors into the wording of the contract.
When looking at both groups of people, there are four tests that can be administered. The first is the Control Test. The Control Test looks at the individual's independence when it comes to their work. If they have full control over what they are doing with their jobs, they are more likely to be an Independent Contractor.
The second test is the Integration Test, and this looks at the day-to-day operations of the individual. It looks at how integral their work is to the daily operations of the organization. If they are an employee, it's likely that their work is more integral to the day-to-day operations as opposed to those of an independent contractor. The third test is the Economic Reality Test. This looks at the control the individual has over various facets of their work, including owning their own tools and the financial risk. An independent contractor would own their own tools and would take on more financial risk than an employee would, a they work on their own.
The fourth and final test is known as the Specific Result Test. This specific test looks at the work that the individual does, and whether or not it is time-specific or an ongoing project. Independent contractors would find themselves in the category of time-specific projects, as they are usually hired to complete projects in a set time period.
Looking at these four tests will help to determine whether or not the individual is considered an employee or an independent contractor. Determining the status of an individual will play a big factor in the wording and structuring of their contract with the organization. Below, I will identify three different areas and briefly discuss how each category factors into the wording of the contract.
Time Devoted to the Company
In a contract, sometimes you will see the amount of time that is required of the individual to devote to the organization. From personal experience, I have had the number of hours I am to be working outlined in my contract for my jobs throughout the summer. This would make me an employee with the organization. Employees are to have the time that they are supposed to be devoting to the company written into the contract. For independent contractors, the time is not to be drafted into the agreement. Restricting their amount of time takes away from their level of control, which is a key component of being an independent contractor. As soon as the organization tries to control the independent contractor, it would look like they were more of an employee. So, in contracts with independent contractors, the number of hours that should be devoted to company are not to be put in the agreement.
Relationship to be Established
In the contract, it is crucial to identify the relationship that is being formed at the start of the agreement. The determination of the relationship is important for the rest of the agreement, and it helps to determine the rest of the contract. At the beginning of each agreement for employees, it needs to be identified that the individual is indeed an employee. This will avoid any complications down the road, and will outline the individual's roles with the organization. The same goes for an independent contractor, as it should be outlined in the beginning that they are an independent contractor. This will help clarify their situation, and the agreement will help differentiate themselves from the employees in the organization.
Reason for Hiring
While both employees and independent contractors are different in so many ways, they are both important pieces to the organization and are hired for a particular reason. These reasons for hiring need to be outlined in the agreement, for both employees and independent contractors. This explanation will help to reduce role ambiguity, and will outline what the individual was hired to do within the company.
As you can see, it's critical to identify which category the individual falls into. This will help to clarify their situation, and thus reduce any problems down the road if issues were to arise surrounding the agreement.
- T.B.
In a contract, sometimes you will see the amount of time that is required of the individual to devote to the organization. From personal experience, I have had the number of hours I am to be working outlined in my contract for my jobs throughout the summer. This would make me an employee with the organization. Employees are to have the time that they are supposed to be devoting to the company written into the contract. For independent contractors, the time is not to be drafted into the agreement. Restricting their amount of time takes away from their level of control, which is a key component of being an independent contractor. As soon as the organization tries to control the independent contractor, it would look like they were more of an employee. So, in contracts with independent contractors, the number of hours that should be devoted to company are not to be put in the agreement.
Relationship to be Established
In the contract, it is crucial to identify the relationship that is being formed at the start of the agreement. The determination of the relationship is important for the rest of the agreement, and it helps to determine the rest of the contract. At the beginning of each agreement for employees, it needs to be identified that the individual is indeed an employee. This will avoid any complications down the road, and will outline the individual's roles with the organization. The same goes for an independent contractor, as it should be outlined in the beginning that they are an independent contractor. This will help clarify their situation, and the agreement will help differentiate themselves from the employees in the organization.
Reason for Hiring
While both employees and independent contractors are different in so many ways, they are both important pieces to the organization and are hired for a particular reason. These reasons for hiring need to be outlined in the agreement, for both employees and independent contractors. This explanation will help to reduce role ambiguity, and will outline what the individual was hired to do within the company.
As you can see, it's critical to identify which category the individual falls into. This will help to clarify their situation, and thus reduce any problems down the road if issues were to arise surrounding the agreement.
- T.B.