Guidelines for Employments Status (Independent Contractors)
This contains guidelines for determining status as defined by the Utah Employment Security Act, Section 35A-4-204(3).
Services performed by an individual for wages or under any contract of hire, written or oral, express or implied, are considered to be employment subject to this section, unless it is shown to the satisfaction of the division that:
- The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the contract of hire for services; and
- The individual has been and will continue to be free from control or direction over the means of performance of those services, both under the individual's contract of hire and in fact.
The following factors are considered to determine if an individual is customarily engaged in an independently established trade, occupation, profession or business:
- Separate Place of Business. The worker has a place of business separate from that of the employer.
- Tools and Equipment. The individual worker has a substantial investment in the tools, equipment, or facilities customarily required to perform the services. “Tools of the trade” such as those used by carpenters, mechanics, and other tradespeople do not necessarily demonstrate independence.
- Other Clients. The individual worker performs services of the same nature for other customers or clients and is not required to work full time for the employer.
- Profit or Loss. The worker can realize a profit or risks a loss from expenses and debts incurred through an independently established business activity.
- Advertising. The worker advertises services in telephone directories, newspapers, magazines, the internet, or by other methods clearly demonstrating an effort to generate business.
- License. The individual has obtained any required and customary business, trade or professional licenses.
- Business Records and Tax Forms. The worker files self-employment and other business tax forms required by the Internal Revenue Service and other tax agencies.
When an employer retains the right to control and direct the performance of a service, or actually exercises control and direction over the worker who performs the service, not only as to the result to be accomplished by the work but also as to the manner and means by which that result is to be accomplished, the worker is an employee of the employer for the purposes of the Act.
The following factors, if applicable, aid in determining whether an employer has the right to exercise control and direction over the service of a worker.
- Instructions. A worker who is required to comply with another person’s instructions about when, where and how they are to work is ordinarily an employee. This factor is present if the employer for whom the service is performed has the right to require compliance with instructions.
- Training. Training a worker by requiring an experienced person to work with the individual, by corresponding with the individual, by requiring the individual to attend meetings, or by using other methods, indicates that the employer for whom the services are performed expects the services to be performed in a particular method or manner.
- Pace or Sequence. A specific requirement that the service must be provided at a pace or ordered sequence of duties imposed by the employer indicates control and direction. However, mere coordinating and scheduling of the services of more than one worker does not indicate control and direction.
- Work on Employer’s Premises. A requirement that the service be performed on the employer’s premises indicates that the employer for whom the service is performed has retained a right to supervise and oversee the manner in which the service is performed, especially if the service could be performed elsewhere.
- Personal Service. A requirement that the service must be performed personally and may not be assigned to others indicates the right to control or direct the manner in which the work is performed.
- Continuing Relationship. A continuous service relationship between the worker and the employer indicates that an employer-employee relationship exists. A continuous relationship may exist where work is performed regularly or at frequently recurring although irregular intervals. A continuous relationship does not exist where the worker is contracted to complete specifically identified projects, even though the service relationship may extend over a significant period of time.
- Set Hours of Work. The establishment of set hours or a specific number of hours of work by the employer indicates control.
- Method of Payment. Payment by the hour, week or month points to an employer-employee relationship, provided that this method of payment is not just a convenient way of paying progress billings as a part of a fixed price agreed upon as the cost of a job. Control may also exist when the employer determines the method of payment.
These factors are intended only as guides for determining whether an individual is an employee or independent contractor. The degree of importance of each factor varies depending on the occupation and the factual context in which the services are performed.
Workers classified as “independent contractors” either by themselves, by the principal for whom they work, or by contract are not excluded from being considered in employment simply because of that classification. The Act does not contain the term “independent contractor” and an exclusion for such does not exist. In order for the services performed by workers to be excluded from coverage under the Act, they must satisfy both tests mentioned above.
If you have classified or contemplate classifying any of your workers as “self-employed” or “independent contractors,” please notify DWS in order that a proper determination of status can be made. By doing this, you may avoid additional unexpected liabilities, interest and penalties.