There is no such thing as a Contract Employee

I hear the phrase “contract employee” from employers all the time. In the immortal words of Inigo Montoya in The Princess Bride, I always want to say, “I do not think that word means what you think it means.”

There is no such thing as a contract employee. When someone works for you, they are either a contractor or an employee. This decision is driven by IRS regulations, which are changing.

I published an article in November touching on the difference. While that article remains true, in March 2024, we are going to see further changes. While these changes are already being challenged, I am advising my clients to be prepared to implement them.

According to the Department of Labor, “The new “independent contractor” rule restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor. The rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.”

If you aren’t sure what this means for you, reach out to your HR Consultant or Employment Attorney. If you don’t know where to start, we would love to help.