2.1 Classification of Temporary Workers as Employees or Contractors

When a department requests temporary help, the classification of the temporary workers providing the services must be determined. Typically such workers fit into one of three categories:

• Temporary employee of the Institute: An individual who is hired to fill an occasional or seasonal position on a part-time or full-time basis and is paid a wage by the Institute.
• Employee of a temporary agency who is assigned to the Institute: In this situation, the temporary employee is an employee of a temporary agency, is paid a wage by the agency, and is assigned by the agency to work for a specified period at the Institute.
• Independent contractor: This is an individual who provides contract services to the Institute and is paid a contract fee by the Institute through Accounts Payable.
  

There is no single definition of a contractor or an employee. A number of federal and state statutes, as well as precedents of case law including the Internal Revenue Code, Fair Labor Standards Act, and Immigration and Naturalization Service regulations determine such classifications. In general, an employee is distinguished from a contractor by the employer’s right to direct and control both the way the employee performs the work and the result(s) of that work. The IRS has identified 20 factors to consider in this analysis. No one factor is considered to be more important than any other, and a worker does not need to display all 20 factors to be considered an employee. Consistency in the application of these factors is required by the IRS:

• Instructions:
  If a worker is required to follow the company's instructions about when, where, and how s/he is to work, employee status may exist.
• Training:
  If the worker is required to undergo company training to any significant extent, employee status may exist.
• Integration:
  If the worker's services are integrated into a company's operations in a way that suggests the worker is subject to the direction and control of the company, employee status may exist.
• Services rendered personally
  A requirement that services must be rendered personally by the worker implies that the company is interested in the methods used to complete the work and the results, indicating employee status may exist.
• Assistants:
  If the company hires, supervises, and pays assistants for the worker, then employee status may exist. If, on the other hand, one worker hires, supervises, and pays the other assistants pursuant to a contract by which the worker agrees to provide materials and labor, contractor status may exist.
• Continuing relationship:
  An ongoing relationship between a worker and company suggests employee status, even if the work is not continuous and may even be irregular.
• Set hours of work:
  If the company establishes fixed working hours, this implies control over the worker, signaling that employee status may exist.
• Full-time work:
  If the worker must devote full time to the company and is therefore restricted from doing other gainful work, employee status may exist.
• Work location:
  If work is performed on the company's premises, especially if the work could be performed elsewhere, employee status may exist.
• Order or sequence of work:
  If the work must be performed in an order or sequence established by the company, and the worker is not free to follow his or her own pattern of work, then employee status may exist.
• Reporting:
  If the worker is required to submit regular oral or written reports to the company instead of simply achieving the results, employee status may exist.
• Payment for services:
  Payment by the hour, day, week or month generally implies an employer-employee relationship. Payment by the job or straight commission implies that the worker is more likely a contractor.
• Payment of expenses:
  If the company pays the travel or business expenses of the worker, employee status may exist.
• Furnishing tools and materials:
  If the company supplies tools, materials, or other equipment, employee status may exist.
• Significant investment:
  If the worker does not invest in the facilities used by the worker, employee status may exist. If the worker makes significant investment in the facilities used, contractor status typically exists. (Areas that are often scrutinized are home offices and equipment.)
• Profit or Loss:
  A person who usually does not realize a direct profit or loss as a result of providing services (because they are compensated at a fixed rate) is typically an employee. A person who can realize a profit or loss directly as a result of his or her agreement to provide services is more likely a contractor.
• Working for one firm at a time:
  A worker who performs services for only one company at a time is typically categorized as an employee.
• Services not available to the general public:
  A worker who does not generally make his or her services available to the general public is typically viewed as an employee.
• Right to discharge:
  The right to discharge a worker at any time is a factor indicating employee status. In contrast, a contractor may not be discharged if the contractor produces results that meet contract specifications. A contractor relationship may only be terminated upon completion of the contract.
• Right to terminate: A worker with the right to terminate his or her relationship with the company at any time without incurring any liability is generally an employee.