To determine if a worker is an employee or independent contractor based on the legal rights and obligations (that is, the terms) in the contract you entered into with your worker, consider their integration within your business.
Worker represents or performs work in your business
This is a characteristic of an employee.
The worker serves in your business. They are contractually required to perform their work as part of your business.
Example: worker serving in your business
A hotel has room attendants to clean and vacuum and deal with housekeeping requests.
The room attendants:
- are required to wear a uniform with the hotel's logo and a name badge
- were provided with training by the hotel in how their duties needed to be carried out to meet the hotel's standards
- work specific hours and as part of a team to ensure the rooms are made up before the hotel's check-in time
- need to do any duties reasonably asked of them (within their job description) by the hotel.
The room attendants are not operating independently of the hotel as they work within and are part of the hotel. That is, the hotel is the single business being operated.
End of exampleWorker provides services to your business
This is a characteristic of an independent contractor.
The worker is operating independently of your business if they perform work to further their own business.
The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.
Example: worker operating independently of your business
A hotel offers a range of services to its guests, including in-room massage. The hotel enters into an agreement with a massage therapist to perform the massages for their guests.
If a guest requests a massage, the massage therapist uses their own equipment to provide the massage in the guest's room.
The client may either pay the massage therapist directly or add the cost to their room account, in which case, the hotel takes out a service fee before passing on the net amount to the massage therapist.
The hotel vetted the massage therapist before allowing them to conduct their business on their premises. As specified in their agreement, the hotel takes no responsibility for any negative outcome for the guest or massage therapist.
The massage therapist does massages at other hotels and can also visit clients in their own homes. They are free to refuse work the hotel offers.
The massage therapist provides their own business cards to the clients and tells clients that they can book future massages directly with the massage therapist when they are not staying at the hotel.
The massage therapist is operating independently of the hotel as the massage therapist:
- is performing work to further their own business, independently of the hotel
- performs services as specified in their agreement and is free to accept or refuse additional work.