Employee Versus Independent Contractor

In the course of operating a website or blog, you might hire people to perform work for you. For example, you might hire someone to design your website or write code for some functionality that you want on the site. You might hire other journalists or bloggers to create content for the site. Depending on the nature of your enterprise, you might even be able to take on volunteers or interns to perform tasks in return for the opportunity to get some experience or training in the field of online publishing. There are nearly limitless ways that you can structure these work relationships, and how you structure them has legal consequences. Quite often, these legal consequences hinge on whether the person that you've hired is an "employee" or an "independent contractor." This is a question of the law of agency, but it affects copyright ownership, personal liability, and tax issues, to name a few.

The information on this page is mainly geared toward the "hiring party," the person who is hiring someone else to perform work. But it applies equally to the "hired party," the person who is hired to perform work. You may find yourself carrying on online publishing activities in the position of the hired party, and you can draw guidance from this information as well.  If you find yourself working as an independent contactor (often called a freelancer), you might find some useful tips in this Salon article: What Every Freelancer Should Know.

When the Determination is Made

The question of whether a hired party is an "employee" or "independent contractor" often comes up after some dispute arises, and someone files a lawsuit. This means that the question won't necessarily be resolved definitively until a court rules on the issue. Before any dispute arises, the parties to an employment relationship can enter into a contract that designates the hired party as an "employee" or "independent contractor," but a court is not obliged to honor that designation if the actual circumstances of the relationship tell a different story. That said, an agreement formalizing the parties' understanding of their relationship may have great weight in a court's determination of the question. It is generally a good idea to create such an express agreement, because it gives both sides more certainty as to their legal status, and will help them meet their respective tax obligations, which must be done without the aid of a court determination. For more on the tax consequences of "employee" versus "independent contractor" status, see the Independent Contractors vs. Employees page on the IRS website.

The Factors Considered

As a general matter, a hired party is the employee of the hiring party when the hiring party controls (or has the right to control) the manner and means of the hired party's performance of work. The fact that work is performed gratuitously does not mean that the hired party is not an employee. Restatement (Third) of Agency § 7.07(3). In contrast, a hired party is an independent contractor when he "is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking." Restatement (Second) of Agency § 2(3). The touchstone, then, is the amount of control that the hiring party exerts over the hired party's work.

Other factors play a role as well. Courts apply a fact-sensitive, multi-factor test in order to determine whether someone is an employee or independent contractor. Some of the factors include:

• the extent of control that the parties have agreed that the hiring party may exercise (and the extent actually exercised) over the details of the work (if a lot, leans toward employee; if not much, leans toward independent contractor);
• whether the hired party is engaged in a distinct occupation or business (if no, leans toward employee; if yes, leans toward independent contractor);
• whether the type of work done by the hired party is ordinarily done under supervision (if yes, leans toward employee; if no, leans toward independent contractor);
• the skill required in the hired party's occupation (if little, leans toward employee; if a lot, leans toward independent contractor);
• whether the hiring party supplies the tools and other instruments used in the work and the place in which to perform it (if yes, leans toward employee; if no, leans toward independent contractor);
• the length of time during which the hired party is engaged by the hiring party (if a longer time, leans toward employee; if a shorter time, leans toward independent contractor);
• whether the hired party is paid by the job or by the time worked (if the latter, leans toward employee; if the former, leans toward independent contractor);
• whether the hired party's work is part of the hiring party's regular business (if yes, leans toward employee; if no, leans toward independent contractor); and
• whether the individuals believes that they are creating an employment relationship (if yes, leans toward employee; if no, leans toward independent contractor).

Other important factors include whether the hired party receives employee benefits, whether the hiring party withholds income and social security taxes for the hired party, and whether the hiring party has the right to assign additional projects to the hired person, all of which support the conclusion that the hired party is an employee. You see these factors in most ordinary employer-employee relationships.

Some Examples

As you can see, it won't always be easy to tell ahead of time if someone is an employee or independent contractor. But some generalizations are possible:

• A "guest blogger" who chooses her own topics, writes and posts content with little or no editorial input from other co-bloggers, and who works from her own home using her own computer would probably not be an employee of the more permanent blogger or bloggers running the site. She would be an independent contractor.
• A staff journalist working for an online news service that receives a yearly salary and employment benefits, who works on stories assigned to him by an editor who exercises substantial editorial oversight, and who works out of the company offices would likely be an employee.
• A photographer who "picks up" individual projects for the same online news service from time to time, gets paid by the project, and who works out of her own home using her own equipment would likely be an independent contractor.

The particular examples are not terribly important. The point is that many factors are involved, but control over the performance of work is the most important one. Despite the complexity of the test, your "common sense" as to who is an employee and who is a "freelancer" will likely serve you well in most instances.

Note: The determination of who is an employee and who is an independent contractor is very difficult to make in the abstract. The material on this page is no substitute for the individual attention of a lawyer and/or accountant who is familiar with your personal circumstances.