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Independent Contractors Part 2

October 8, 2018, Author: Bradford Batten

The first part of this discussion focused on the individual and weather they coordinated their own crew, and supplied their own specialized equipment.

In this second part of our discussion on independent contractors we will look at the first three questions in the second part of the test used by the Department of Labor and Industries in Washington state.  Part B of the Independent Contractors Guide centers around the question the individual’s business entity.  The first three questions we will be looking at are:

  1. Are they free from your direct control?
  2. Is the individual’s business separate and different from your own?
  3. Did the individual have an existing business before you brought them on, or does that individual have a principal place of business that qualifies for a tax deduction?

This first question is trying to determine if the individual is able to set her own schedule of work, come and go as she needs; is she free to perform her work according to her best judgement without your direct control or supervision.  If she is then the evidence suggests that she is acting like an independent contractor.  The existence of a contract between the two parties demonstrating separation is a key sign that she is an independent contractor.  If neither of these conditions exist, than you must cover her under you worker’s compensation insurance.

Question 2 seeks to discover if in fact the contractor is separate business.  Is he performing a task that is outside of the normal course of business?  A general contractor who hires a masonry company to build a brick patio is an example of an independent contractor.  The work of a mason is demonstrably different that the work of a general contractor.  Does this individual perform his essential tasks in a location different than your own?  The mason performs his work at various job sites, and the general contractor has an office also separate from the job site.  If these conditions are met, the evidence suggests that the individual does not need to be covered by your workers compensation insurance.

The last question that we’ll discuss in this second part of our discussion, is: can the individual provide evidence of a separate business prior to beginning working for your business?  Can this individual provide her own market materials or customer lists?  Does she belong to her own trade groups or professional organizations?  These are some of the things that will demonstrate the she has her own separate business from you. Also, does the individual have a rent or mortgage payment that entitles them to a deduction in their annual income tax return?  If not, the evidence would suggest this person is an employee, not an independent contractor.  Please note that any contract that protects the individual from all possible loss, or any contract that ends the individual’s business at the termination of your contract disqualifies the individual as an independent contractor and you must cover that person under your worker’s compensation insurance.

https://www.lni.wa.gov/IPUB/101-063-000.pdf

 

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