As of January 1, 2013, a new law went into effect that combines the test for independent contractor versus employee for workers compensation, unemployment coverage, and wage and hour. There are still a number of employers who are not aware of this law change or even the rules around independent contractors generally. It is easy to see why: in the past, different branches of government have had different tests and even now the IRS has a different list of factors from Maine; though it is very similar, it is more comprehensive. But treating an employee as an independent contractor is dangerous – not only may it involve a workers’ compensation penalty and a DOL audit, but tax penalties for not doing wage deductions and a possible wage and hour claim. For a worker to be an independent contractor, key factors include: 1) the worker has their own independent business; 2) the worker has the essential right to control the means and progress of the work; 3) the individual must have the opportunity for profit or loss (being paid by the hour for all hours worked would sound more like an employee as opposed to an independent); 4) the individual hires and pays their own assistants and decides who will do the work; 5) the worker makes their services available to others in the community. There is then a second list from which several but not all the factors must be met. For a full list of the factors and tests involved, or if you would like assistance to ensure that your business is in compliance, contact Rebecca Webber at 784-3220 or rwebber@sta-law.com. This article is not legal advice but should be considered general guidance in the area of wage and hour issues.
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