What Is the Difference Between an Employee and an Independent Contractor?

By: Boffeli & Spannagel, P.C. Workers’ Compensation Attorneys

Under Iowa law an employer must provide workers’ compensation insurance for all of its employees. However, an employer is not required to provide workers’ compensation insurance for an independent contractor.

The line between who is an employee who is entitled to work comp benefits, and who is an independent contractor who will not receive workers’ compensation benefits can be very hard to determine.

In the 1931 case of Mallinger v. Webster City Oil Co., the Iowa Supreme Court came up with the test for determining who is an employee and who is an independent contractor, which is still followed today. The test requires looking at eight factors, and no single factor is necessarily controlling.

In the rest of this post, we discuss the eight factors. In discussing each of the elements, we use the hypothetical of an employer who is a home builder, and the potential employee or independent contractor is a roofer.

Here are the eight factors of the test and how different facts would be interpreted in our hypothetical of a home builder and a roofer:

1. WHETHER THERE IS A CONTRACT TO PERFORM THE ROOFING JOB FOR A FIXED PRICE – If the roofer has agreed to perform the roofing job for a set price, that would increase the probability that the roofer will be treated as an independent contractor.
2. WHETHER THE ROOFER HAS AN INDEPENDENT BUSINESS – If the roofer does roofing for a large number of different home builders, that will increase the probability that the roofer will be treated as an independent contractor.
3. WHETHER THE ROOFER EMPLOYS ASSISTANTS WHO HE SUPERVISES – If the roofer has his own employees who he supervises and directs, this will increase the probability that the roofer will be treated as an independent contractor.
4. THE OBLIGATION OF THE ROOFER TO PROVIDE HIS OWN TOOLS AND MATERIALS – To the extent that the roofer has his own roofing tools, and provides the materials such as the shingles, this will increase the probability that the roofer will be treated as an independent contractor.
5. To the extent that the home builder provides the tools and the shingles, this will increase the likelihood that the roofer will be treated as an employee who is entitled to receive work comp benefits.
6. WHETHER THE ROOFER HAS THE RIGHT TO CONTROL THE PROGRESS OF THE WORK, EXCEPT AS TO THE FINAL RESULTS – The home builder will always have the right of final approval over the roofing job. However, if the roofer has complete discretion in how to do the roofing job, that will increase the probability that he will be treated as an independent contractor.
7. To the extent that the home builder can give direction on how the roofing work is done (and not just approve or reject the final work) that increases the probability that the roofer will be labeled an employee.
8. THE LENGTH OF TIME THE ROOFER PUTS ON ROOFS FOR THE HOME BUILDER – If the roofer only does one roof for the home builder, that increases the probability that the roofer will be treated as an independent contractor.
9. By contrast, if the roofer spends an entire season putting on roofs for the home builder that will increase the probability that the roofer will be deemed to be an employee.
10. WHETHER THE ROOFER IS PAID BY THE HOUR OR BY THE JOB – If the roofer is paid a flat amount based on the job, that will increase the probability that he will be found to be an independent contractor.
11. If the roofer is paid by the hour that will increase the probability that he will be found to be an employee.
12. WHETHER THE ROOFING WORK IS PART OF THE REGULAR BUSINESS OF THE HOME BUILDER – Roofing would probably be considered to be part of the regular business of a home builder, so this factor would probably weigh in favor of the conclusion that the roofer was an employee.
13. By contrast, if the home builder hired someone to install a pool, and that was not a regular part of the homes that the builder constructed, then this element of the test would increase the probability that the pool builder would be found to be an independent contractor.

CONCLUSION:

Figuring out whether an injured worker is an independent contractor who is not entitled to workers’ compensation benefits, or an employee who is entitled to work comp benefits can be difficult. If you are in this gray area and you are hurt on the job, you should talk to a lawyer to help determine whether you are entitled to receive Iowa workers’ compensation benefits.