b'Employee v. Independent ContractorWho, What, Why . . . Who does it apply to: Any employer who characterizes someoneOther Work. If the person works solely for you, perhapswho works for them as an independent contractor. has set hours of work, and would not have time for another customeroremployer,theyareprobablyanemployee. Why does it matter: While you may not think it matters muchIndependentcontractorsregularlyworkfornumerous whether the individual pays their taxes or you withhold them,customers or clients.theIRS,TexasWorkforceCommission(TWC),andTexasHow Paid. If you pay a weekly salary or draw that is notAttorney General (for child support) care a lot. Additionally, itdependent on performance, they are probably an employee. could become an issue for your business in many different typesIndependentcontractorsareusuallypaidbythejoband of lawsuit. dont get paid if a job is done unsatisfactorily.Terminating the Relationship. If you can unilaterally letHowdoesitaffectme:Mischaracterizinganindependentthe person go in the middle of a project or they can walk contractorasanemployeehasnominalconsequences,butaway from work in progress, they are probably an employee. theconsequencesofmischaracterizinganemployeeasanIndependentcontractorscannotusuallybeterminatedin independent contractor can be significant. You may be auditedthe middle of a project without someone having a right to by the TWC or IRS and subject to penalties and interest. damages.What is the rule: The TWC and IRS will start with a presumptionCommon Situations: that the person is an employee, so owners really start off withOutsideSalesRep:Oftenthemostdifficulttocharacterize, one strike against them. The tests used by the TWC, IRS, and inthe outside sales representative is a bit of a chameleon. The commercial litigation are all different, but the factors consideredfactorsthatreallymatterhereare:(1)whetheryouprovide are similar. What follows is an amalgamation of the tests thattraining or a particular sales pitch; (2) whether they act as a should give you a good idea of what category the person fallssales representative for other companies or whether you would into: allow the person to sell for another company; (3) how they are Instruction and Control. This is the KEY factor! If you saypaidstraight commission or commission and salary; and (4)where to go and leave it up to the individual to get the workwhetheryoureimburseexpenses.NOTE:Ifthereisevera done, they may be an independent contractor. If you tellcovenant not to compete, you best characterize them as an the individual how to do it, they start to look more like anemployee. employee. Each additional instruction slides the scale closer to employee status.Training.Ifyouaretrainingthem,theyareprobablyemployees.Equipment and Expenses. If you provide equipment andpay expenses, they are probably an employee.Benefits. If you provide benefits, like healthcare and 401(k),the person is almost definitely an employee.15'