Determining Employee Status

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Determining Employee Status

Summary: Facts

Make-a-Bed Furniture Company wanted hired an external consultant, John, who would streamline their manufacturing processes in order for the company to save money. The president of the company decides to hire him as an independent consultant since John has other engagements. John is instructed on how to carry out his duties, the number of hours he should work per week, and how to claim his wages, which would be on an hourly basis. He finishes his external work and reports to the company as a fulltime employee, despite still being paid for 20 hours a week. John is replaced by another agency when he fails to make any formal recommendations after a year. He files for unemployment benefits, and sues the company when it claims that he was a contractor, not an employee.

Analysis

There are various rules that determine whether an individual is an employee or an independent contractor as stipulated in the IRS 11-factor test. Employment status is determined by the degree of behavioral control and independence of the worker. Employees are given direct instructions on how to work, where and when. Independent contractors are allowed to seek out other forms of business externally.

Conclusion

From the common laws test, John is an independent contractor. Firstly, he is allowed to have other businesses on the side, as stated in the law. Secondly, he was paid hourly, which is typical of an independent contractor. Finally, his relationship with his employer was temporary, as his job was to streamline the company’s processes. Therefore, it is correct to assert that John is an independent contractor, not an employee.

As a human resource director, in future, I would ensure that three things have been done first during hiring. Firstly, I would ensure that all employees and independent contractors have signed contractors that clearly define their status. Secondly, I would ensure the worker is treated according to their employment status to avoid any confusion. Finally, I would ensure that the permanency of the relationship has been clearly defined.