Home Archives September 2006 Rules for contractors: Clarifying jobs

Rules for contractors: Clarifying jobs

| Print |  Email
Friday, September 01, 2006

For years, employers have struggled to comply with the legal obligations for employees, as opposed to independent contractors, because of conflicting definitions and enforcement policies. These definitions and notices have varied among state agencies. Additionally, Oregon’s test has not been coupled with the test used by the IRS.

The Oregon statutory rules were revised at the first of the year, and the revisions are now more closely aligned with the federal rules. But there is still no guarantee that an individual will have the same status under both federal and state law.

In order to be an independent contractor in Oregon, individuals must meet three of the five following criteria:

  1. Maintain a business location.
  2. Bear the risk of loss related to the business or the provision of services.
  3. Provide contracted services for two or more different persons within a 12-month period, or routinely engaging in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.
  4. Make a significant investment in the business.
  5. Have the authority to hire other persons to provide or to assist in providing the services and having the authority to fire those persons.

Conversely, the IRS uses a common law test and has traditionally considered 20 factors in making its determination. The factors that the IRS considers are set forth at www.irs.gov.

Employers have an obligation to correctly classify workers. Both the IRS and the State of Oregon will determine whether an employment relationship exists. If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker and penalties. In addition to penalties and interest, the IRS reserves the right to seek civil and criminal sanctions against the employer. The IRS reported in 2004 that during the prior three years, 117 people were sentenced to confinement for criminal violations related to employment taxes.

If you are unable to determine whether a person is an employee or an independent contractor, you can ask the IRS to make that determination. IRS Form SS-8, “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding,” is available online. Oregon’s Department of Consumer & Business Services provides a similar service through its Employer Compliance Unit.

— Peter O. Watts
Associate, Jordan Schrader Attorneys
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

More Articles

Innovation: a critique

News
Wednesday, October 08, 2014
1008 innovation thumbBY LINDA BAKER | OB EDITOR

A Design Week panel discussion raises questions about how innovative we really are.


Read more...

October surprise

News
Sunday, October 12, 2014
roundup-logo-thumb-14BY LINDA BAKER

Cylvia Hayes, tabloid vs. watchdog journalism and the looming threat of a Cascadia earthquake.


Read more...

Semiconductor purgatory

News
Monday, October 06, 2014
roundup-logo-thumb-14BY LINDA BAKER | OB EDITOR

Intel's manufacturing way station; Merkley's attack dog; Diamond Foods gets into the innovation business.


Read more...

Video: The 100 Best Survey

News
Thursday, August 28, 2014

100-best-logo-2015 500pxw-1OB Research Editor Kim Moore shares some pointers about the 100 Best Companies to Work For survey.


Read more...

The Backstory

October 2014
Thursday, September 25, 2014

In our cover story this month, Wendy Collie, CEO of New Seasons Market, and Kim Malek, owner of Salt & Straw, discuss their rapidly growing businesses and Portland’s red hot food scene. The conversation provides an interesting lens through which to explore trends in the grocery store and restaurant sectors.


Read more...

True Blood

October 2014
Thursday, September 25, 2014
BY JOE ROJAS-BURKE

Antibiotics really aren’t magic bullets.


Read more...

Two Sides of the Coin

Contributed Blogs
Friday, September 26, 2014
0926 iphone6-thumbBY JASON NORRIS | GUEST BLOGGER

This post focuses on the recent release of the new Apple iPhone as well as Alibaba's IPO, the largest U.S. IPO in history.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS