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What are the differences between an Independent Contractor and an Employee?

It is important for an employer to know the difference between an independent contractor and an employee. An employer can be liable for the misclassification of an employee as an independent contractor. This is the first blog in the series that will discuss the differences between independent contractors and employees, how they are treated under Pennsylvania law, and the risks an employer can face when they misclassify an employee as an independent contractor.

Definition of an Employee

Discussing the difference between an independent contractor and an employee.

Black’s Law Dictionary defines an employee as “a person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the right to control and direct the employee in the material details of how the work is to be performed.” In other words, if an employer controls most aspect of an employee’s work, then it is likely that the worker is an employee.

Definition of an Independent Contractor

Independent Contractor

An Independent Contractor is a person or company that is typically hired on a project or contract basis. Further, IRS distinguishes an employee from an independent contractor and states that a worker is an independent contractor if the employer has “the right to control or direct only the result of the work” and does not control “what will be done and how it will be done.”

Unlike an employee, an independent contractor is hired to perform a specific task or job, not to perform general work for the employer.

Differences between an Independent Contractor and Employee

In Pennsylvania, there are many key differences between an independent contractor and employee:

  1. Control: An employee is typically under the control of their employer and follows the employer’s instructions. An independent contractor has more independence on when and how they complete their work. over how they complete their work
  2. Taxes: An employee’s employer is responsible for withholding and paying taxes on their behalf. An independent contractor is responsible for paying their own taxes and will be able to offset their expenses against the money received.
  3. Benefits: Employees may be entitled to receive benefits from their employer such as health insurance, vacation time, and sick leave. However, independent contractors typically do not receive such benefits.
  4. Liability: Employers are generally liable for the actions of their employees while they are on the job, but they are not generally liable for the actions of independent contractors. An employer should be careful to make sure their independent contractor has its own insurance.
  5. Labor laws: Pennsylvania labor laws and regulations that govern wages, hours of work, overtime pay, and other employment-related matters generally only apply to employees, and are typically not applicable to independent contractor relationships.

Because hiring someone as an independent contractor shifts many of the costs associated with hiring a worker from the employer to the worker, employers often improperly misclassify an employee as an independent contractor to avoid paying unemployment, various taxes, and workers compensation.

Misclassification of an Employee as an Independent Contractor

In Pennsylvania, it is possible that an employee that has been misclassified as an independent contractor can pursue the employer for labor law protections, seek to obtain workers compensation, and pursue other employee rights.

Kaminsky Law represents employees that have been misclassified as independent contractors and hurt on the job, discriminated against, retaliated against, and/or have not been paid in accordance with Federal and Pennsylvania State wage laws.

Kaminsky Law also represents small businesses to advise employers on steps they should take to ensure their employees and independent contractors are properly categorized and to prepare agreements with their workers.

Contact Kaminsky Law.

Whether someone is an employee or an independent contractor is fact specific and can depend on a variety of factors, including the type of work, the amount of control the employer has over the worker, and the level of independence the worker has in carrying out their work.

As always, do not hesitate to contact Kaminsky Law for a free consultation today at 215-876-0800 or fill out a contact form here!

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Anton Kaminsky
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