Employee versus Contractor Determination
Introduction
It is vital for the employer to distinguish the difference between employee and contractor during the hiring process because even though an employee and independent contractor, employer’s obligation towards the contractors are minimal compare to the employee (Strauss, 2004). Primarily, the most important reason for employers to focus on the distinctions between employee and independent contractor is the issue regarding tax (Fragoso & Kleiner, 2005). The work classification influences how the employer pays Federal income tax, social security and Medicare taxes, together with the filing of the tax return. It can also affect the eligibility for employer and social security benefits, worker’s compensation, unemployment benefits, insurance and retirement benefits (NH Small Business Development Center, n.d.).
In order to determine the case of Terry McCann, three tests will be employed: control, economic dependence and multi-factor test. This will help to know if McCann is an employee or an independent contractor.
Control Test
The Right to Control test is considered as one of the most applied test in deciding if a person is an employee or independent contractor. This is also called the Internal Revenue Service (IRS) test which focus on the right of the employer to direct and control the way employees, including the final results and details on how, when and where to execute and accomplish a job (Fragoso & Kleiner, 2005).
Behavioral control pertains on the right to direct or control how does the worker does the work. According to ISR, a worker is considered as an employee if he or she is being directed and controlled by the employer. Thus, if a worker receives extensive instructions on how work must be done, it may suggest that he or she is an employee (NH Small Business Development Center). In the case of McCann, it can be said that he is an independent contractor because he can be fired by the hiring firm or he can terminate the contract within 24 hours’ notice, he can set his own working hours, he works on his own, does not accept any formal training. Above all, McCann also accepted and signed a contract which signifies his relationship with the company, together with the provision of the company that he can work with other establishments or firms.
On the other hand, there are some irregularities with the employment arrangements given by the Forrester. First, Terry is required to record his attendance on site, together with the different incidents that occurred, thus, if a worker regularly offer written or oral reports on the status of a given project, the said arrangements can signifies possible employment relationship (Office of the Comptroller, 2007). Aside from that, the company is also pay Terry in weekly basis, which is, like hourly and monthly pay schedules are characteristics of employment relationship (Office of the Comptroller, 2007). Terry was also provided by the company with a parka and a jumper with the logo of the company, which can also be considered as another ground for employment relationship because workers who perform their work using the provided equipment, tools and materials of the company are more likely to be considered as employees (Office of the Comptroller, 2007). In connection, according to the declaration and advertisement of Forrester, it is the responsibility of McCann to regularly patrol the internal and external premises of the company, at the same time, monitor the security surveillance equipment.
Based on the said result, it can be said that it will be hard to recognize if McCann is an employee or an independent contractor, therefore, it is important to use other important tests in order to make sure what to conclude regarding the case. It will be important to focus on more issues that are related to the relationship of McCann towards the company, together with the connection of his jobs or responsibilities towards the overall performance of the company.
Economic Dependence Test
Economic dependence test is also known as organization test or integration test or simply, as the Duck test. This test inspects if an individual is part and parcel of an organization by focusing on: (1) the connection of the work being performed to the entire business, (2) how the worker is publicly presented; (3) how the standard organizational policies are being applied to the individual and (4) the percentage of the total income of the individual being offered by the employer (Human Resources 101, 2008). This test was developed in order to counter the lack and shortage of the control test (Kelly, Holmes, & Ruth, 2005). In general, this test examines whether the individual doing the work is dependent on the organization in economic manner. Because, the more dependent an employee towards the organization, the more he or she is to be considered as an employee (Arts Law Centre of Australia Online 2008).
In the case of McCann, what he applied and he’s responsibility towards Forrester Creations is to be a security officer that will in night shift. Therefore, the primary focus of McCann’s job and accountability is to maintain the security of the premises of the company, which include the different assets such as equipments, tools, ideas, important documents and finished products that are located inside the fashion house. Thus, it is important to take note of the fact that Forrester Creations is a designer and manufacturer of high end fashion garments; therefore, it is safe to say that McCann’s job is not directly related to the overall performance or process of the company, particularly in the aspect of management., marketing and other important processes that can affect the overall performance of the company. This is in spite of the fact that maintaining security inside the premises is vital for the operation of the company. Consequently, in this test, it can be said that McCann is a contractor.
Multi-Factor Test
Aside from the said factors which include the control and the integration of the worker towards the company, it is also important to focus on other factors that might conclude if McCann is an employee or an independent contractor that can help regarding on the decision if he will received the medical or financial benefits. One of the important factors to consider is the preliminary agreement that McCann will not have an exclusive contract with the company, meaning he will not have an employment contract with the company, which will enable him to gain different benefits. In addition, the company also stated that he will have to pay for his own income tax because of the fact that the company will not have the obligation to do so, because of his “indirect” relationship with the company. Above all, the company also stated that he will not have the rights to have other benefits of employees’ inclu8ding leave and other etc. As a result, it can be concluded that the company had been able to explain to McCann his relationship with the company. However, just like what have mentioned, one of the irregularities done by the company is their action to offer McCann a “uniform” with the company’s logo, and enable him to use other equipments of the company, including those that are needed to monitor security in the premises of the company.
Court Argument
Having a contract which states a non-executive relationship between the employee and the employer does not mean that a worker is already considered as a contractor because there are still different factors that must be considered. However, in the case of McCann, based on the different factors that are connected with the tests done, it can be said that there is no doubt that he is a contractor. This is because he is: working without detailed directions regarding the procedures, using his own experience and expertise in order to do his job with no preliminary training, working alone with no supervision, setting his own hours of work, working for different employers at a time, paying his own expenses out of expected salary, together with income tax. Aside from that, it is stated and in the agreement that McCann can be fired if work falls short of expectation. Based on that, like what the law states, McCann is in no position to avail of any employee benefits and compensation. For a hurt employee, it is an automatic responsibility of the employer to offer medical treatment, together with the partial payment for the lost wages of the employee. These payments are generally handled through the compensation insurance, and it will be required whether or not the company was at fault for the injury of the employee. This rule is somewhat different with the independent contractor, because like what have said, contractors have their limited rights towards the different benefits and compensations.
On the other hand, independent contractor who is injured due to some dangerous situation at the business premises can recover medical bills, together with the lost income from the business, as well as money for the pain and suffering, however, it is vital for McCann to show the negligence from the employer. In that case, it is important to implement another in-depth investigation regarding the event (Steingold, 2007).
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