For small business owners hiring both independent contractors and employees, it is important to fully understand the distinctions between the two to avoid complications from the Maine Workers’ Compensation Board (WCB). With everyone looking to cut costs and the WCB’s Abuse Investigation Unit cracking down on worker misclassification, we take a look at the definition of an independent contractor as laid out in the Workers’ Compensation Act, 39-A M.R.S.A. §102(13-A).
The Act requires that all of the following factors be true before an employer can designate a worker as an independent contractor:
1. The employer does not control day-to-day work: the worker sets his/her own hours.
2. The worker has “an independently established trade, occupation, profession or business.”
3. The worker has a chance for profit and loss from the work, so should not be paid on a salaried or hourly wage basis.
4. Any assistants to the worker must be hired, paid, and supervised by the worker.
5. The worker can work for multiple companies, even if his right to do so is temporarily restricted by a work assignment.
If all five of the above factors apply to the worker, he/she can be designated an independent contractor if at least 3 of the below are also true:
1. The worker uses his/her own tools and materials.
2. The worker can work for multiple companies.
3. The worker is contractually responsible for satisfactory completion of the work.
4. There is a written contractor for independent contractor services.
5 The worker is not paid hourly.
6. The work is outside the usual course of business for which the service is performed.
7. The IRS has determined that the worker is an independent contractor.
To make employers’ lives easier, the Board provides an Application for Predetermination of Independent Contractor Status, which can be filled out and submitted before work begins. It is important to remember that submitting the form does not make you audit-proof. However, by following the rules laid out above, employers can rest a little easier in the knowledge that they are likely properly designating their workers’ status.
For more information about this complicated issue, please contact the attorneys at Tucker Law Group.