An increasing number of companies are using independent contractors rather than W-2 employees. While many jobs like commission sales positions have traditionally been filled by independent contractors, companies in other sectors of the economy are increasingly using independent contractor (IC) agreements to avoid the financial costs associated with W-2 employee status. Businesses gain substantial financial advantages by filling their personnel needs through IC labor both in the form of reduced cost and potential limits on liability. Since ICs are not subject to worker’s compensation benefits, companies might attempt to veil their relationship with workers as non-employees to avoid the obligation to obtain worker’s compensation insurance and the cost of benefits.
While many companies utilize an independent contractor agreement as a tool to evade obligations to employees, an IC agreement is not dispositive if the business-worker relationship functionally amounts to an employee-employer relationship. Under Mississippi law, an IC contracts to perform work based on his or her own methods without the exertion of control by the employer, except as to the results of the work. The IC is free from the authority of the employer regarding how the designated work will be performed and the assertion of control as to the methods of completing the employment objectives. When making a determination regarding an employee’s status under this test, Mississippi courts consider the following factors:
- Whether the servant is engaged in a distinct business or occupation
- Whether the work constitutes a type of regular business engaged in by the employer
- Degree to which the employer exercises control over details of performance of the work
- If the employer supplied the place of work and tools to perform the required tasks
- Whether compensation is based on time or completion of the job
- Level of skill required of the employee in the occupation
- Duration of the master-servant relationship
The point is that an employment relationship exists if the services provided are an integral part of the ordinary business of the company, and the service provider is not offering an independent business or professional service to the company. The ultimate classification is controlled by the actual conduct of the parties irrespective of the worker’s designation in a contract between the company and the service provider. Of the factors above, control over the specific manner the work is performed constitutes the most important consideration.
A growing number of companies are taking advantage of the economic benefits of classifying service providers as independent contractors. There are substantial advantages for companies in taking this approach, including shifting the tax burden to the service provider, as well as potentially avoiding the expense associated with unemployment or worker’s compensation benefits.
By the same token, the cost to a person providing services of being characterized as an independent contractor is extremely high. The person must pay both income and self-employment taxes. This arrangement effectively means that the service provider is covering the portion of FICA that would be covered by an employer in a traditional employment relationship. The employee also may bear the risk of job loss or a job-related injury.
If you are a worker misclassified as an independent contractor who suffers an on-the-job injury, our experienced Mississippi Worker’s Workplace Injury Lawyers can analyze your employment relationship. We have successfully represented clients in obtaining worker’s compensation benefits despite attempts by their employer to claim they were exempt IC service providers. At Barrett Law, we are here to help. Contact our law firm today at (601)790-1505 to schedule your free consultation, so we can answer any questions you may have regarding filing your claim.
