So what’s the difference between independent contractors and employees for your business? Why is it important to make the distinction? And, how do know what’s best for my business?
Arizona statute A.R.S. § 23-902(C) defines an independent contractor as:
“[a] person engaged in work for a business, and who while so engaged is independent of that business in the execution of the work and not subject to the rule or control of the business for which work is done, but is engaged only in the performance of a definite job or piece of work, and is subordinate to that business only in effecting a result in accordance with that business design.”
See ARS statutes here: https://www.azleg.gov/arsDetail/?title=23
Arizona courts have ruled that whether an individual is an employee or an independent contractor is governed by the “right to control” test.
Meaning, whether the employer retains the right to supervise or control the method of reaching the result contracted (Ringling Bros. & Barnum & Bailey Combined Shows, Inc. v. Superior Court In and For Pima County, 140 Ariz. 38 (Ariz. App., 1983)).
As an employer, am I in control?
The primary issue is one of “employer control.” Meaning, does the hiring party define how the clinician’s work will be accomplished?
Independent contractors provide a service pursuant to a contract (whether written or unwritten) without the direction of the person paying the bill (the employer).
An independent contractor controls how the service is provided, who provides it, and the method of accomplishing it.
The key is that the independent contractor acts independently. Free of direction and control of the hiring company (employer).
Yet, in making this determination, the totality of the facts and circumstances of each case must be examined.
No one factor is in itself determinative, but among the relevant factors are:
- Who has paid for materials, supplies and equipment? A contractor generally provides their own supplies and tools.
- What type of skill is required? Was the work performed in the regular course of business? A contractor generally brings a specialized skill set.
- Is there permanence in the job? A contractor often works project to project. Or, if the worker is trained by and receives regular work from the same company, the worker is more likely to be considered an employee.
- Is the worker an integral part of the business? A contractor can often be replaced by another contractor.
- Does the hiring party control when the worker comes to work? How are work hours set? A contractor generally makes his or her own hours.
- Does the worker receive a steady paycheck? A contractor often receives variable payments upon completion of projects or tasks.
- Is it the worker’s only source of income? A contractor usually works for several parties.
- What is the duration of the employment?
- Who has the right to hire and fire?
What do I do next to know if an independent contractor or an employee is best for my business?
A business must weigh all these factors when determining whether a worker is an employee or independent contractor. There are no set number of factors that make a worker an employee or an independent contractor.
Also, factors which are relevant in one situation may not be relevant in another.
Our business attorneys routinely guide business owners on this important issue. If you’re ready for help with independent contractors or employees, give us a call today.