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CLRM Alerts Is your independent contractor really an employee? The answer to this question matters, (a) for tax purposes, (b) in determining whether labor and employment laws apply to your relationships with those who work for you, and (c) in determining which of you has the copyright in works produced for you during the relationship. As “outsourcing,” consulting and telecommuting become more common, some companies are discovering that courts’ and government agencies’ views of who is an “employee” are also evolving. In a widely publicized ruling late last year, for example, a federal appeals court ruled that writers hired by Microsoft Corp. as independent contractors were “employees,” in part because they worked at Microsoft’s facility under direct supervision. Not to be left behind, the Internal Revenue Service revised its training materials for its examiners during 1996 to de-emphasize some of the factors it has traditionally used to define an “employee,” such as where work is performed and who provides the tools, and to place greater emphasis on more fluid factors such as the degree of the company’s control over the details of work and whether the contractor can sustain profit or loss in the relationship. Other agencies including EEOC and the Department of Labor can be expected to follow the IRS’ lead. A written agreement tailored to these and other “red flag” dimensions of the relationship can often go a long way toward demonstrating whether it is an independent contractor or employment relationship.
Cook, Little, Rosenblatt & Manson ALERTS are produced periodically as a service of Cook, Little, Rosenblatt & Manson, p.l.l.c. and are intended to highlight emerging legal issues affecting our clients and friends. It is, of course, no substitute for specific legal advice. |
