Independent Contractor Definition

TCU employs individuals on an independent contractor status. This status is one that is monitored according to IRS guidelines.

TCU’s position is that a worker is an employee unless it can be shown how they are an Independent Contractor according to IRS guidelines.. TCU’s policy is that anyone currently on the Human Resources payroll cannot also be an independent contractor. If an employee does work for a department other than their home department, they must be hired into a second job and paid as an employee.

The IRS currently uses a 20-factor test to determine whether a worker is an independent contractor or an employee. These factors are used to determine when someone is an independent contractor and when they are not.

  1. Instructions – A worker who must obey company instructions about how the job is to be performed is usually determined to be an employee of the company.
  2. Training – An independent contractor comes to a company fully trained.
  3. Integration – The closer the relationship between the work of the company and the work of the worker, the more likely the worker is an employee.
  4. Services Rendered Personally – If the company demands that services be performed personally by the worker, this shows control by the company over the worker, which makes it more likely that the worker is an employee.
  5. Hiring, Supervising, and Paying Assistants – If a company hires, supervises, and pays a worker’s assistants, this also shows company control, making the worker most likely an employee.
  6. Continuing Relationship – A continuing relationship between worker and company tends to show an employer-employee relationship.
  7. Set Hours of Work – Independent contractors have the freedom to plan their own workday.
  8. Full-Time Work – An independent contractor should be free to accept or reject a job offered by the company.
  9. Place of Business – An independent contractor should possess his or her own place of business separate from that of the company’s business site.
  10. Work Schedule – An independent contractor will set his or her own work schedule.
  11. Reports – Employees are often required by employers to turn in reports, which are viewed by the IRS as evidence of control.
  12. Method of Payment – Payment to independent contractors should be by the job, rather than by the day or by the hour.
  13. Business/Travel Expenses – An independent contractor should pay for all of his or her own expenses.
  14. Furnishing Tools, Equipment, and Materials – If a company covers the cost of a worker’s tools, materials, or equipment, independent contractor status is weakened.
  15. Significant Investment – The larger the worker’s investment in his or her own business, the more likely the IRS will accept independent contractor status.
  16. Realization of Profit or Loss – An independent contractor should be capable of either realizing a profit or suffering a loss.
  17. Working for More Than One Company – Independent contractor status is strengthened where a worker has a diverse and significant client base. However, a worker can perform services for several companies and still be classified as an employee at one or all of them.
  18. Making Services Available to the General Public – An independent contractor’s name should be advertised or held out to the general public as being in business for him or herself.
  19. Right to Discharge – While an employer may discharge an employee, parties to an independent contractor agreement have an obligation to terminate their contract with a notice requirement.
  20. Right to Quit – If a worker can terminate employment with a company at any time without incurring liability, it is suggestive of an employee-at-will relationship. An independent contractor, on the other hand, cannot simply walk away from a contractual relationship with a company.