Why is it important to know whether the person who works for you is an employee or an independent contractor? Because the answer determines if he or she must be covered by your workers’ compensation policy.
So, How Can You Tell?
According to the Workers Compensation Act, anyone who performs work for you is an employee, unless he or she:
- Is free from control and direction in the performance of the service
- Is customarily engaged in an independent trade, occupation, profession or business related to the service being provided
- Has no employees of their own
Questions to Ask
- Do you tell the individual when or how to do the job?
- Is the individual "free from control or direction"?
- Do you provide tools or equipment?
If you answered YES, this person in not free of direction and control and is considered an employee. If you answered NO, then this person is "free from control" so please continue and ask yourself the following:
Is the individual “engaged in an independent trade, occupation, profession or business”?
- Does the individual:— Have a business name?— Carry business insurance?— Offer this service to any other business?— Submit invoices?— Supply the tools and vehicle?— Work alone? (If not, he or she may need to carry workers’ compensation as their worker may be an employee.)
- Are the payments made to the business name?
- Is the individual paid by a fixed rate?
If you answer YES to all the above questions, the facts indicate the individual is independent, meaning you are not required to cover him or her under your workers’ compensation policy. Need to get a workers' compensation policy? Try a 5-minute insurance quote from Cake.
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