Mind the Lines
The line between employee and contractor has never been clear-cut. In fact, the IRS themselves acknowledge the huge amount of “grey area” when they state:
“There is no ‘magic’ or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.”
Additionally, the IRS bases their determination on answering the following question: Does the payer have “the right to control or direct only the result of the work and not what will be done and how it will be done”?
Get your company’s answer to that question wrong and the consequences can be dire: back taxes, back benefit payments, civil penalties. If you have any doubt at all it would be cheap insurance to consult an attorney experienced in such determinations. The likes of FedEx, Uber, and eBay can afford to fight the legal battles on multiple fronts for a sustained period of time. Can you?
But there is hope: many countries, including Canada, Germany, and Sweden have an additional category: dependent contractor. With the growing number of individuals engaged in work that falls into the “grey area” between employee and independent contractor, there is a growing effort to clarify the lines and add this new category into the legal codes of many countries. But until those changes are made, be careful when approaching the dividing line and recognize the risks associated with crossing those lines.