Worker Classification

Worker Classification

Is your worker an independent contractor or an employee?
Under Mississippi Law §71-5-11 J.(14), the Mississippi Department of Employment Security (MDES) is the governing authority to make this decision. Neither the employer, nor the worker, has the authority to make this distinction.

There are many facts considered when deciding whether a worker is an independent contractor or an employee.

These relevant facts fall into six main categories:

  1. 1. Extent of control
  2. 2. Nature of business
  3. 3. Furnishing tools
  4. 4. Materials and place of work
  5. 5. Period of employment
  6. 6. Method of payment
  7. 7. Relationship of worker to firm.

In each case, it is very important to consider all the facts--no single fact provides the answer.

Some of the questions you should consider would include:

Extent of control
Is the worker required to perform services during regular working hours?
Is the worker supervised or given instructions?
Is the worker allowed to engage helpers to assist in the work?
Who determines the price of the goods sold?

Nature of business
Whose business name does the worker operate under when performing services?
Does the worker hold themselves out to the public to perform similar services?
Does the worker advertise their services?

Furnishing tools, materials and place of work
Do you provide the worker tools or materials?
Does the worker wear a uniform or special clothing?
Do you provide the pace of work for the worker?

Period of employment
May the worker terminate the services at any time without liability?
Are the worker’s services subject to termination by the firm ay any time without liability?

Method of payment
How is the worker paid (hourly rate, commission, salary, etc.)?
Is the worker required to enter a bid for a job?

Relationship of worker to the firm
Are federal and state taxes withheld from the amount paid to the worker?
Do ou carry Worker’s Compensation on the worker?
Do you require the worker to carry any type of insurance?

Written Contracts - a written contract may show what both you and the worker intend. This may be significant if it is difficult to determine status based on the facts; however, if the worker meets the criteria of being an employee, the written contract has no bearing.

Significant Investment - if the worker has a significant investment in the work, they may be an independent contractor. While there is no precise dollar test, the investment must have substance. However, a significant investment is not necessary to be an independent contractor. 

Expenses - if the worker is not reimbursed for some or all business expenses, then they may be an independent contractor, especially if the unreimbursed business expenses are high.

Opportunity for profit or loss - if the worker can realize a profit or incur a loss, this suggests they are in business for themselves and may be an independent contractor.

Employee benefits - if the worker receives benefits, such as insurance, pension, or paid leave, this is an indication the worker may be an employee. If they do not receive benefits, theycould be either an employee or an independent contractor.

When your worker is an employee
As an employer, it is your responsibility to maintain a correct social security number along with verification, using the e-verify system, to determine the employee’s right to work status. You are required to file quarterly reports for all wages and pay employment tax. As an employer, you are also required to withhold all applicable federal and state taxes and provide the worker a Form W-2 showing the taxes withheld.

When your worker is an independent contractor
You may be required to give the worker a Form 1099-MISC, Miscellaneous Income, to report what was paid to them.