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Independent Contractor Vs. Employee

(Photo Credit: Thinkstock)

(Photo Credit: Thinkstock)

feldman_amy Amy Feldman
Amy E. Feldman is a business commentator and legal business...
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By Amy E. Feldman

PHILADELPHIA (CBS) - How do you know if the guy who’s working for you is your employee or your independent contractor?

Fourteen exotic dancers at the Spearmint Rhino strip club sued the club because it treated them like independent contractors. Although the women earned a half a million dollars in tips (geez, I’m in the wrong profession) were charged to “rent” djs, overhead costs, and other fees. They said they should have been paid as employees, and the club just settled the case for 13 million dollars. So? How do you pay your stripper?

Ok, even if you deny you have a stripper, how about how you pay your house cleaner? Or lawn service? How should you?

The IRS looks at several factors to determine how to classify a worker. The more you control how the worker does her job, the more likely you would be considered the employer. Facts that provide evidence of the degree of control and independence fall into three categories:

• Behavioral control – do you direct how the worker performs the tasks? Come on this day, clean this, leave that there.
• Financial control – do you pay for all the worker’s expenses like cleaning products for your home and decide how the worker is paid?
• Does the person get vacation, sick pay and get benefits?

To make sure you’re classifying all the people you pay properly, visit the IRS website even if you don’t pay your people in single dollar bills.