Independent Contractors vs Employees: What’s the Difference?

A worker’s classification as an independent contractor or employee has a significant effect on that worker’s legal rights. Workers categorized as employees are entitled to minimum wage protections, overtime pay, regulated working conditions, the right to organize and collectively bargain, workers’ compensation, and payroll tax contributions and withholding, among several others. Independent contractor status gives employers and independent contractors more flexibility with their work relationship. The independent contractor can often work for multiple employers and has more control over the time, manner, and means of completing their work. Additionally, employers are generally liable for harmful acts committed by their employees, but not for their independent contractors.

Classification of a worker is highly fact sensitive and often depends on the context of the work and the particular jurisdiction. Simply calling a worker an “independent contractor” or an “employee” is not determinative of the worker’s status, and courts will analyze the actual work and surrounding circumstances to determine a worker’s status. Indiana follows the common law “agency test,” and Indiana courts analyze ten different factors to distinguish employees from independent contractors. However, the most important factor tends to be the degree of control that the employer has over the manner and means of the work performed by the worker.

Misclassifying an employee as an independent contractor can have severe consequences for employers, such as audits, fines, penalties, and lawsuits. Therefore, it is crucial that your business properly classify its workers to ensure full compliance with the law.

Call us at 317-825-5110 to talk to an experienced employment law attorney about reviewing your business’s worker classification, or for a review of your current job classification.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.