Independent Contractor or Employee

December 1, 2010

Employers generally seek to have individuals working for them classified as independent contractors. There are financial benefits and limitation of liability benefits to the small business associated with this classification. Many parties use an employment agreement or an employee handbook which states to an individual, “you are an independent contractor.” Such a contract clause is helpful, but not necessarily sufficient. Business owners, you must treat these individuals as independent contractors in order to assure yourself the benefit of that classification.

The standard in North Carolina for determining whether or not an individual is an employee or an independent contractor is based on the extent to which the party for whom the work is being done has the right to control the manner and method in which the work is performed. In analyzing this standard, North Carolina has looked at the same factors for over sixty years. They are:

Is the person employed (a) engaged in an independent business, calling, or occupation; (b) has the independent use of his special skill, knowledge, or training in the execution of the work; (c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (d) is not subject to discharge because he adopts one method of doing the work rather than another; (e) is not in the regular employ of the other contracting party; (f) is free to use such assistants as he may think proper; (g) has full control over such assistants; and (h) selects his own time.

A central issue for courts is: does the employer have control over the process in formulating the final product or just the final product itself? Small business owners, if you want to ensure that an individual is an independent contractor, you must not have control over the process. Generally, the issue is the ability to control the process; not whether you actually controlled the process.

These eight factors have over sixty years of case law analyzing them. If your business is having a dispute as to whether or not an individual is an employee, or if your business wants to proactively identify a strategy to allow for independent contractor status, contact a business law attorney such as Maginnis Law, PLLC. Maginnis Law uses Raleigh civil attorneys to handle small business litigation matters in Raleigh, Cary, Apex, Zebulon, Wake Forest, Clayton and the rest of Wake and Johnston Counties. Contact the firm at 919.526.0450 for a free initial consultation or visit our website at www.maginnislaw.com for more information.

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