Understanding Worker Classification Crash

How to distinguish employees from independent contractors.

Last updated 2022-01-10 | 4.3

- Learn common factors used to test whether a worker is an employee or independent contractor
- Apply common factors to their personal business situation
- Use Self-Assessment Tools to identify business practice that may adjustment so workers can be properly classified as independent contractors

What you'll learn

Learn common factors used to test whether a worker is an employee or independent contractor

Apply common factors to their personal business situation

Use Self-Assessment Tools to identify business practice that may adjustment so workers can be properly classified as independent contractors

Keep organized records of your contractors' classifications

* Requirements

* Students will need software or programs that allow them to view pdf and excel documents

Description

Understanding Worker Classification is a crash course that will help business owners learn the factors used to determine whether a worker is an employee or independent contractor.

The additional bonus resources included with the course are:

Independent Contractor v. Employee Self-Assessment questionnaire (one for each test covered in the course: 20 factor, IRS Test and Economic Realities Test);
Independent Contractor Worksheet (one for each test covered in the course: 20 factor, IRS Test and Economic Realities Test);
5 Step Guide to Conducting your Self-Audit;
20 Factor Cheat Sheet with examples;
50 State Survey that sets forth the worker classification tests used in each state; and
IRS Independent Contractor Information Sheet
Form Independent Contractor Agreements for Single Projects and Recurring Projects

There is about 2 hours of learning material including videos, power point presentation, and audio recordings.

I will discuss some background issues on worker classification and then dive right into the 20 factor test. I will define each factor and discuss a comparison of two cases: one where the worker was determined to be an independent contractor and another where a class of workers were found to be employees. That way, you can see real situations that these factors were applied and learn common "do's and don'ts." After every 5 factors, I will do a brief recap and discuss important take-a-ways. Once we conclude the 20 factor test, I also address the IRS Test and the Department of Labor Economic Realities test. I will then go through next steps for your business and the 5 simple steps to conduct your self-assessment. After that, I do a lecture where I discuss the key provisions of the form contracts that are included in the course and then I give a course wrap up.

Worker classification is a hot issue for the federal government and state agencies which have increased audits in this area. Understanding these issues will help your business get proactive and hopefully stop a problem before it starts.

Please remember that the information in this course should be used as a general reference and you should not solely rely on this information for making legal decisions. You should consult an attorney for employment law issues.

Who this course is for:

This course is meant for business owners who have independent contractors or who intend to have independent contractors.
This course could also be for attorneys or HR personnel looking to gain a better understanding of worker classification issues.
This course is probably not for those who don't have a workforce or have any interest in employment law.

Course content

6 sections • 20 lectures

Worker Classification Basics 3 lectures

Introduction Preview 02:29

The introduction will give a brief overview of what the course is about as well as the course objectives and goals for the students.

What is Worker Classification? Preview 03:03

This section will discuss the following:

definition of worker classification,
why worker classification matters for businesses
consequences for classifying a worker as an independent contractor when the worker should be an employee
why businesses like to classify workers as independent contractors;
what gives rise to a classification audit; and
what to do if you're faced with an audit.

I also share some recent facts on how 19 states have received funds from the federal government solely for worker classification detection and enforcement. Yikes! Watch the lecture to find out if your state is one of them.

How is Worker Classification Determined? Preview 01:37

This section gives a brief overview of the various tests used to evaluate worker classification. I will also give some background on the two cases that we were evaluate in the case comparison: National Heritage v. DES and CLEAN, LLC v. DES.

Don't forget to download the resource attached. I spent many many hours preparing a 50 state survey that provides the worker classification test used in each state (for both employment and workers' compensation) and give you links to other state resources in this area.

The 20 Factor Test 9 lectures

Analysis of Factors 1 - 5 Preview 07:40

This lecture will define the first 5 factors. These factors are:

level of instruction,
training,
business integration,
services performed personally, and
control of assistants.

After I define each factor, I will discuss the case comparison and show you how two different companies structured their relationship with its workers as it relates to each factor. You will also see the courts decision about whether each factor weighed in favor of independent contractor, employee, or neutral and why.

Factors 1 - 5 Key Points Preview 01:39

This lecture recaps the important points and key take-a-ways from factors one through five.

Analysis of Factors 6 - 10 Preview 07:25

The lecture goes over factors six through ten which are:

Continuity of relationship,
flexibility of schedule,
demands for full-time services,
need for on-site services, and
order and sequence of work.

Factors 6 - 10 Key Points Preview 01:39

This lecture recaps the important points and key take-a-ways from factors six through ten.

Analysis of Factors 11 - 15 Preview 07:25

The lecture covers factors eleven through fifteen which are:

requirements for reports,
method of payment,
payment of business/traveling expenses,
provision of tools and materials, and
significant investment.

Factors 11 - 15 Key Points Preview 02:01

This lecture recaps the important points and key take-a-ways from factors eleven through fifteen.

Analysis of Factors 16 - 20 Preview 08:50

The lecture discusses factors sixteen through twenty which are:

realization of profit or loss,
working for multiple companies,
services to the general public,
right to discharge, and
right to terminate.

Factors 16 - 20 Key Points Preview 01:32

This lecture recaps the important points and key take-a-ways from factors sixteen through twenty.

Summary and Other Important Considerations Preview 01:37

This section covers a summary of the case comparison and the result of each case. This lecture also discusses other important things to consider when determining the classification of a worker.

Resource: Common Law Factors with examples is a 1 page cheat sheet that contains the 20 factors with an example of an employee versus and independent contractor in each factor.

Bonus Lectures: IRS and Department of Labor Independent Contractor Tests 3 lectures

Bonus Lecture: IRS Worker Classification Test Preview 06:17

This course covers the 20 Factor Test and by now, you should have a solid understanding of the things that an agency may consider during a classification audit. As an added bonus, this lecture reviews the current IRS classification test (which uses most of the 20 factors). The materials includes and IRS Test Information Sheet that can be used as a reference.

*Please note that the self-assessment materials are included under What's Next for your Business.

Department of Labor Guidance on Worker Classification Preview 04:44

As of July 15, 2015, the United States Department of Labor issued guidance on the test it used to determine if a worker is an independent contractor or employee under the Fair Labor Standards Act. This lecture goes into a basic and general background of the FLSA and introduces the Economic Realities Test.

Department of Labor Economic Realities Test Preview 16:07

This lecture takes a deeper look into each factor of the Economic Realities Test and provides examples directly from the Department of Labor to help you better understand each factor. The materials include a pdf of the powerpoint slides.

Next Steps for your Business 3 lectures

What's Next for your Business? Preview 12:01

This lecture will discuss next steps for your business and provide you with self-assessment tools so you can evaluate your own business practices. For each of the 20 Factor Test, the IRS Test, and the Economic Realities Test, the materials include:

A self-assessment questionnaire to get you thinking critically about your business practices; and
A worksheet that organizes the results of your assessment so you can get a holistic view of where you may need to make adjustments.

Using these three tests in conjunction with one another and making the necessary adjustments should help reduce the risk that your contractors are later classified as employees.

5 Simple Steps for Conducting a Self-Assessment of your Business Preview 06:38

Now that you have an understanding of the 20 factors and have been thinking about your own business situation, I will cover 5 simple steps you can take to conduct your self-assessment. These steps are:

Get Organized
Determine Audit Type
Complete Independent Contractor v. Employee Self-Assessment Form
Complete Independent Contractor Worksheet
Make Adjustments

The resource guide attached can be used as a easy reference to refer back to these steps.

Contractor Agreements Preview 08:56

New Developments 1 lectures

Update from the Missouri Supreme Court Preview 11:31

This lecture analyzes the Missouri Supreme Court case of Gateway Taxi Management v. Department of Employment Security and the effects it has on worker classification issues.