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Employee or Independent Contractor? - The Maryland
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 Posted 11:59 PM Oct. 26, 2014 Employee or Independent Contractor? - The Maryland Guide to Wage Payment and Employment Standards Maryland wage and employment laws do not apply to "Independent Contractors". The question of who is an employee and who is an independent contractor is important and often complex. Moreover, the financial consequences in making this determination are significant for both workers and employers. For workers, these consequences include entitlements to minimum wage and overtime pay, unemployment benefits, workers' compensation benefits, Social Security employer contributions, federal and state tax withholdings, protections against illegal employment discrimination, etc. At stake for employers are the financial and legal obligations in complying with these federal and state requirements. For individuals in landscaping and construction, please refer to the Workplace Fraud Act.
Return to the Maryland Guide to Wage Payment and Employment Standards home page Questions or comments about the Employment Standards Service may be directed to ess@dllr.state.md.us. Updated February 25, 2014 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Factors in Making the Distinction Between an Employee and an Independent Contractor - The Maryland Guide to Wage Payment and Employment Standards Although many factors are considered, and no one factor by itself is controlling, the following basic principles often apply in determining whether a worker is an employee or an independent contractor: Generally, the employer/employee relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work, but also as to the details and means by which that result is accomplished. That is, an employee, and not an independent contractor, is subject to the will and control of the employer not just as to "what" shall be done, but "how" it shall be done. The right to discharge is also an important factor indicating that the person possessing that right is an employer, and the person subject to it is an employee. Other factors characteristic of an employer-employee relationship are the furnishing of tools, materials and a place to work to the individual who performs the services. Independent contractors are persons who are in business for themselves. Their business is usually different from the business of the person for whom the work is performed. Generally, those who follow an independent trade, business, or profession, in which they offer their services to the public, and who may be in a position to suffer financial loss rather than a guaranteed wage, are independent contractors and not employees. Persons involved in certain professions and occupations are often conducting business as independent contractors. These include physicians, lawyers, dentists, veterinarians, construction contractors and subcontractors, certified public accountants, etc. However, many persons with these occupations work for firms, associations, institutions, leasing companies or organizations and, in those cases, may be employees and not independent contractors.
Return to the Maryland Guide to Wage Payment and Employment Standards home page Questions or comments about the Employment Standards Service may be directed to ess@dllr.state.md.us. Updated February 25, 2014 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Case Studies - The Maryland Guide to Wage Payment and Employment Standards The following three case studies are generalized examples of situations where the question of employee or independent contractor commonly arise. They are by no means comprehensive, and illustrate the operation of only some of the factors applied in making the distinction. A. A company runs a referral service for physical therapists, where hospitals or other health care organizations call to obtain temporary workers in that field. When an order is received, the company sends out a physical therapist from its list. The client health care organization pays the referral company who, in turn, keeps an amount for its overhead and profit and pays an hourly or daily amount to the physical therapist. Although the physical therapist is not directly supervised by the referral company, the company maintains the right to expect adherence to acceptable performance standards and to discharge the physical therapist on any adverse reports from client health care organizations. The referral company's right to discharge, together with its administration of the contract with the client health care organization and its payment of wages to the worker, appear to indicate that the physical therapist is most likely an employee and not an independent contractor. B. A general contractor hires a painter to paint a new house. The general contractor is not, herself, a housepainter. The painter uses his own tools, obtains his own materials, is free to hire helpers if necessary, comes and goes when he likes (as long as he gets the job done properly and on schedule), and bids for other jobs during the period he is performing the job for the general contractor. The painter appears to be in business for himself. The general contractor provides no assistance or direction to the painter in the performance of the job, but is only interested in the end product. The painter is most likely an independent contractor and not an employee. C. A truck owner hires a driver to deliver loads the owner has contracted to haul for a large transportation company. The driver is free to take the truck home with her but is instructed to leave it parked on the street. The driver is free to devise her own routes, reject any load she wishes, and work her own hours within the constraints of the company's deadlines. She is also free from direct daily supervision, merely reporting to the owner on a weekly or bi-weekly basis. The owner pays all bills on the truck including fuel, tolls, insurance and maintenance. The owner pays the driver 30% of the gross receipts. Although some elements exist which would seem to point to the driver as an independent contractor, other elements outweigh them including the owner's control over the truck, "hiring" of the driver, and control over the contract with the transportation company. On balance, therefore, the driver is more likely an employee than an independent contractor.
Return to the Maryland Guide to Wage Payment and Employment Standards home page Questions or comments about the Employment Standards Service may be directed to ess@dllr.state.md.us. Updated February 25, 2014 |
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