The Great Debate: Employee or Contractor?

The Common Law Test to determine whether a worker is an employee

The table below classifies employees versus independent contractors under the Common Law Test.


  • Required to comply with employer’s instructions about when, where, and how to work
  •  Works exclusively for the employer
  •  Hired by the employer
  •  Subject to dismissal; can quit without liability
  •  Has a continuing relationship with the employer
  • Work done personally
  •  Performs services under the company’s name
  •  Paid a salary; reimbursed for expenses; participates in company’s fringe benefits programs
  • Furnished tools, equipment, materials, and training
  • If an outside salesperson: company provides leads, sets terms and conditions of the sale, assigns a territory, and controls the sales process

Independent Contractor

  • Sets own hours; determines own sequence of work
  • Can work for multiple employers; services available to the public
  • Is self-employed
  • A contract governs how the relationship can be severed
  • Works by the job
  • Permitted to employ assistants
  • Performs services under the worker’s business name
  • Payment by the job; opportunity for profit and loss
  • Furnishes own tools, equipment, and training; substantial investment by worker
  • Controls the sales process and terms

Nonemployees use Form W-9 to provide a taxpayer identification number (social security number or employer identification number) to the company that the nonemployee has received a reportable payment.

Source: American Payroll Association

Disclaimer: This information is not intended to provide a definitive answer. Always seek guidance from your attorney or accountant when classifying employees. Employers or independent contractors can get a definitive IRS ruling on their worker’s status by completing Form SS-8.