Six Factors to Determine Contractor and Employee Classification

Want a simple way to determine contractor and employee classification? In Alexander vs. FedEx Ground, the California 9th Circuit Court ruled drivers were not independent contractors despite owning their own vans and being allowed to set their own routes.

The court used several factors in its ruling, most notably control.

“Drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”

The U.S. Department of Labor’s economic realities test can be useful to help determine contractor vs. employee classification status:

  • The extent to which the work performed is integral to the employer’s business;
  • Whether the worker’s managerial skills affect his or her opportunity for loss;
  • The relative investments in facilities and equipment by the worker and employer;
  • The worker’s skill and initiative;
  • The permanency of the worker’s relationship with the employer;
  • The nature and degree of control by the employer

Since it is estimated 10% of approximately 10 million US contractors are misclassified, the potential for new federal and state rules and regulations is escalating. Forward thinking companies will get ahead of the curve.

Contact us below to have a KMRD Human Capital Solutions expert help you understand employee classification codes at your business.

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