Creating a Workable Legal Standard for Defining an Independent Contractor

Determining whether a particular worker should be classified as an employee or an independent contractor currently depends heavily upon the specific circumstances of employment. Although current legal approaches are meant to be flexible, the open-endedness of the current tests means that many business owners struggle with fitting their employees into the proper categories. A business that misclassifies employees, whether in good faith or on purpose, will face expensive penalties. Audits for such misclassifications are becoming more frequent, indicating that more and more business owners struggle because of uncertainty in the law. Also, the number of businesses using non-traditional work arrangements is increasing, meaning that this problem is likely becoming more widespread.This article proposes a workable legal standard for defining an independent contractor - the step-back test, based on business practice and on contract law. The next sections of this article summarize current business considerations and legal requirements before turning to the proposed standard. The independent contractor model has been used throughout U.S. history, primarily for its flexibility and cost advantages. In attempting to define the individual’s “degree of control,” current legal requirements often conflate classification with enforcement. These two functions need to be disentangled and focus concentrated on simplifying the appropriate classification of workers.