ISSUES FOR EMPLOYERS
WHO IS AN EMPLOYEE?
IN GENERAL Many laws affecting the work relationship require a business owner to determine first whether a person performing services is legally an “employee” for the particular law at issue. Business owners who use “independent contractors” sometimes assume they have no employees and that employment laws do not apply to them. That assumption is dangerous. A worker’s status is not determined by what the parties call the relationship or what a written agreement says; it is determined by what the worker actually does and the economic and legal realities of the relationship. For most purposes, a worker’s relationship to the business will be one of the following: • Common law employee • Statutory employee • Independent contractor If the individual is a common law employee , the business must, among other things: • Obtain workers’ compensation coverage • Withhold FICA (Social Security and Medicare) taxes and income taxes • Pay the employer’s share of FICA Pay federal and state unemployment taxes Wage‑and‑hour laws, occupational safety and health requirements, and other federal and state employment laws will generally apply as well. If the individual is a statutory employee , the person may be treated as an employee only for certain purposes (for example, FICA, unemployment insurance, workers’ compensation, or wage‑and‑hour), even if they are not a “common law” employee. In these cases, the employer should consult with legal or tax advisors about: • Whether and how to withhold Social Security and Medicare taxes
• Whether to pay unemployment tax • Which employment statutes apply
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