Independent Contractors Determining Classification: Labor Relations
Employee or Independent Contractor?
The National Labor Relations Act (NLRA) specifically excludes contracted persons as employees. As a result the National Labor Relations Board (NLRB) also developed several determinants to decide whether an individual is considered an employee or an independent contractor. The NLRB’s determinants focus on whether the employer has the right to control and provide direction for the work completed by asking:
• How integral is the task to the business (part of continuous product or specialized assistance)?
• How is the individual compensated (wages versus contracted amount)?
• Does the employer have the right to discipline the individual?
• To what extent can the employer supervise the work?
• What is the nature of the skill required to the complete the tasks? Is this skill specialized and not commonplace within the company?
• Does the individual work for other clients or advertise his or her services as a business?
• Can the individual profit from completing the task?
Hiring an independent contractor offers employers many advantages. Unlike for traditional employees, employers do not pay taxes on independent contractors’ wages, and are not expected to provide benefits. Employers often save 30 to 40 percent on labor costs by using independent contractors. In addition, as independent contractors are generally hired for a specific period or project, employers have no obligation to rehire them after each contract period or project is complete.