ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

Is it an Employee or Subcontractor?

We continually hear agents comment that an individual is not an employee because he is paid on a form "1099". Here is a simple questionnaire that differentiates employees from subcontractors for purposes of IRS definition,of benefits and of workers compensation rules. The more "Yes" answers, the more likely the individual is to be considered an employee. This questionnaire is a common set of questions used as guidelines by the government when determining employment status.

1. Instructions - Does the boss have the legal right to give instructions to the worker during the work project?

2. Training - Does the boss teach or train the worker to perform the tasks involved in the project?

3. Integration - Is the job such that various components must be performed by various workers independently, with one task finished before the next begins?

4. Services Performed Personally - Does the boss expect that the worker perform the project (him) herself - not by someone else?

5. Hiring, Supervising, or Paying Assistants - Does the boss select, oversee, or compensate individuals helping with the project?

6. Continuing Relationship - Does the worker perform services periodically?

7. Fixed Hours of Work - Does the boss determine when the worker works?

8. Full Time Required - Does the boss expect the worker to work full time or not hold another job with the boss's competitors?

9. Work on Employer's Premises - Does the worker perform services at the location of the boss's business?

10. Set Sequence or Order - Does the boss have the right to tell the worker which tasks to perform first?

11. Oral or Written Reports - Does the boss expect the worker to report progress as the job is in process?

12. Payment by Units of Time - Does the boss compensate the worker based on either time worked, commissions, or piecework rather on completed project?

13. Payment of Business or Travelling Expenses - Does the boss pay for out-of-pocket expenses of the worker for travel or entertainment?

14. Furnishing Tools or Materials - Does the boss provide the tools or materials necessary for the worker to complete the task?

15. "Significant" Investment - Does the boss have more money at risk in the performance of the task than the worker, (excluding any vehicle owned by the worker and used for any purpose within the task)?

16. Realization of Profit or Loss - Does the boss risk more out- of-pocket money than the worker excluding the possibility the worker may not get paid?

17. Multiple Jobs - Does the boss require the worker to only work for the boss's business in the same industry?

18. Available to the Public - Does the nature of the worker's commitment to the boss severely reduce or restrict the ability of the worker to work for other bosses in the same industry?

19. Right to Discharge - Can the boss terminate the worker during the project without showing violation of the contract?

20. Right to Terminate - If the worker arbitrarily quits, does the boss still have to pay for the work completed even though the project is not yet finished?

The issues that are being evaded or avoided are the payment of certain benefits and taxes. Use these guidelines to determine your chances of success if you are audited for your employment practices.