Although the various tests for determining whether a worker is an employee or independent contractor go by different names, they differ only slightly: all are variants of the common law test for determining whether or not someone is an “employee.” Thus, the tests share common principles. Under all of the tests, the essence of the relationship between a hiring organization and an independent contractor is the agreement by the independent contractor to do a discrete job according to the independent contractor’s own judgment and methods without supervision by the hiring organization.
The common law test, sometimes known as the “right to control” test, looks at whether the organization for which the worker is performing services has the right to control or direct the worker. In a 1987 revenue ruling, the IRS compiled and set out a list of twenty factors that the courts had considered over the years in applying the right to control test.
Those twenty IRS factors are:
(1) whether the worker must comply with another person’s instructions about the work,
(2) whether the worker requires training in order to do the work,
(3) whether the work performed by the worker is integrated into the hiring organization’s operations,
(4) whether the worker must perform the services personally,
(5) who hires, supervises, and pays the worker’s assistants, if any,
(6) whether the worker and hiring organization have a continuing relationship,
(7) whether the work must be performed during set hours,
(8) whether the worker must devote most of his or her time to the work for the hiring organization,
(9) whether the work must be performed on the employer’s premises or can be done elsewhere,
(10) whether the worker must perform services in an order or sequence set by the hiring organization,
(11) whether a worker must submit reports,
(12) whether the worker is paid by the hour, week, or month,
(13) whether the worker’s business or traveling expenses are paid by the hiring organization,
(14) whether the worker furnished the tools, materials, and equipment needed to perform the work,
(15) whether the worker has a significant investment in facilities needed to do the work,
(16) whether the worker can make a profit or suffer a loss as a result of performing the services for
the hiring organization,
(17) whether the worker can work for more than one firm at a time,
(18) whether the worker makes his or her services available to the general public,
(19) whether the hiring organization can discharge the worker, and
(20) whether the worker has the right to terminate the relationship with the hiring organization.
It is a general rule of federal statutory construction that when Congress uses the term “employee” in a statute without defining it further, the courts will presume that Congress intended to describe the typical employer-employee relationship as it is understood at common law. Thus, for Title VII, ADA, and ADEA purposes, the degree of control exercised by the hiring party will determine whether the worker is an employee or independent contractor. The relevant factors include most of those used in the Internal Revenue Code right to control test.
The North Carolina Workers’ Compensation Act and the North Carolina Employment Security Act
Under the North Carolina Workers’ Compensation Act, “employees” are entitled to medical benefits and compensation for lost wages if they suffer an injury by accident while on the job or develop an occupational disease. Te Workers’ Compensation Act defines the term “employee” as “every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied,oral or written.”75 As is the case under the FLSA and the IRC, the definition is somewhat circular. Accordingly, the North Carolina Supreme Court has held that the appropriate test to determine worker status is the traditional common law test*******(See McGown v. Hines, 353 N.C. 683, 686 (2001); Hughart v. Dasco Trans., Inc., 606 S.E.2d 379, 385 (N.C. Ct. App. 2005).)
The common law right of control test as developed under North Carolina law and applicable to both the Workers’ Compensation Act and the Employment Security Act is spelled out in the 1944 case of Hayes v. Elon College. The factors that are indicative of independent contractor status under the Hayes test mirror those found in the FLSA economic reality and the IRC right to control tests, namely, whether the person employed:
(a) is engaged in an independent business, calling, or occupation;
(b) is to have the independent use of his special skill, knowledge, or training in the execution of the work;
(c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis;
(d) is not subject to discharge because he adopts one method of doing the work rather than another;
(e) is not in the regular employ of the other contracting party;
(f) is free to use such assistants as he (or she) may think proper;
(g) has full control over such assistants; and
(h) selects his (or her) own time.
As is the case under the FLSA and the IRC tests, the presence or absence of one factor is determinative.