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This information is provided for educational and guidance purposes only. It is not intended to constitute legal advice nor to substitute the need for legal counsel. Entire contents Copyright 2006. Martin James O'Connell.


Employee or Not?  The Legal Tests

Martin J. O'Connell, Esq.


The following are common "tests" used by the Courts to determine whether or not an individual is an "employee" of an organization or entity (or if, for example, an independent contractor).


Internal Revenue Service

Common Law Test


Fair Labor Standards Act (FLSA) Economic Realities Test

National Labor Relations Board (NLRB) Test

EEOC Guidelines


Can the worker realize a profit or loss?

Whether the worker is engaged in a distinct occupation or business

The degree to which the worker’s opportunity  for profit and loss is determined by the alleged employer


The firm or client is itself in business


Is the worker required to comply with instructions?

Whether the work is usually done under an employer’s direction or by an unsupervised specialist


The degree of control exercised by the alleged employer

Right to Control Test – if the person for whom the services are performed retains the right to control the manner and the means by which the results are to be accomplished, the performer of the service is an employee


If the employer only controls the results, the performer is an independent contractor

The firm or client has the right to control when, where, and how the worker performs the job

Does the work have to be performed according to a set order or sequence?

Whether the hiring party has the right to assign additional projects to the hired party

The firm or the client has the right to assign additional projects to the worker

Does the worker have to perform his services during set hours of work?

The degree of control over the manner and means of performing the work, as opposed to the result

The firm or client sets the hours of work and the duration of the job

The extent of the hired party’s discretion over when and how long to work

Skill Level


The skill level involved

The skill and initiative in performing the job


The work does not require a high level of skill or expertise

Location, Equipment and Supplies

Where is the work conducted?

Whether the worker or company supplies tools, supplies and the place of work

The extent of the relative investments of the worker and alleged employer


The firm or client rather than the worker furnishes the tools, materials, and equipment

Does the worker furnish her own tools and materials?

The work is performed on the premises of the firm or client

Does the worker have an investment in any facilities that are used in rendering the services?

Duration of the Relationship

Is there a continuing relationship with the worker?

The length of employment

The permanency of the relationship


The worker and the firm or client have a continuing relationship

Method of Compensation

Is payment made by the hour, week, month, etc. vs. payment by lump sum or commission?

The method of payment – by the job or by the hour



The worker is paid by the hour, week or month rather than for agreed cost of performing a particular job

The provision of employee benefits

The firm or client provides the worker with benefits such as insurance, leave, W/C

Tax treatment of hired party

The worker is considered an employee of the firm or client for tax purposes (i.e., taxes withheld)



The intent of the parties



The worker and the firm or client believe they are creating an employer/ employee relationship


Are the worker’s services integrated into the business operations?

Whether the work is part of the company’s regular business  and/or necessary to it

Whether the work performed is an integral part of the employer’s business


The work performed by the worker is part of the regular business of the firm or client


Is training required or provided to the worker?





Rendering Services

Does the worker have to personally render the services?






Can the worker hire, supervise, and/or pay assistants?

The hired party’s role in hiring and paying assistants



The worker has no role in hiring or paying assistants

Outside Work

Does the worker render, or have to render, full-time services?





Does the worker render services to more than one firm, client, etc. at a time?

Does the worker make his services available to the general public on a regular and consistent basis?


Does the worker have to submit regular oral or written reports?






Is the worker responsible for payment of her own expenses?






Can the worker be fired or discharged at will?





Does the worker have the right to terminate the relationship at will?








Revenue Ruling 87-41


IRS Publication 1779

CCNV v. Reid, 490 U.S. 730, 751 (1989)




Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) (ERISA)



Categories of Workers




Degree of Control










Full-Time Employees


Part-Time Employees




Leased Employees

Outsourced Employees


Independent Contractors


Individual Independent Contractors








Franchise Employees






















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