A person is required to meet a nine-part test before he or she is considered an independent contractor rather than an employee. A person is not an independent contractor just because they say they are, or because the contractor over them says they are, or even if regulators like the federal government say so. To be considered an independent contractor and not an employee, an individual must meet and maintain all nine of the following requirements:
1) Maintain a separate business with his or her own office, equipment, materials and other facilities
2) Obtain a Federal Employer Identification Number (FEIN) from the IRS, or have filed business or self-employment tax returns based on the work or service in the previous year
3) Operate under contracts to perform specific work or services for specific amounts of money with the independent contractor maintaining control over the means of performing the work
4) Be responsible for operating expenses under the contracts
5) Be responsible for satisfactory performance of the work under the contracts
6) Be paid per contract, per job, by commission or by competitive bid
7) Be subject to profit or loss in performing the work under the contracts
8) Have recurring business liabilities and obligations
9) Be in a position to succeed or fail if business expense exceeds income
In Wisconsin, if you are not an employer yourself, and you do not meet all nine parts of the test, you are considered an employee of the employer that you are working under/for, not a sub-contractor or independent contractor.
If You Hire Independent Contractors
If the contractor you hire does not carry their own worker compensation policy, you can run the risk of being considered their employer. Remember, the burden of proof, and especially the risk of penalties and higher worker compensation premiums lies with you as the general contractor. If the contractor you hired is deemed to be your employee, you will have to pay the worker compensation premium for them. You could also be subject to fines or penalties. Be sure to ask questions based on the ‘nine point test’ above, and always obtain certificates of insurance.