Common-Law Test

The Common-Law Test

A common-law relationship of employer and employee exists when the employer has the right to control both what work will be done and how it will be done. To determine if a worker may be classified as an employee and if the employer has the right to control, the Internal Revenue Service uses the 20-factor common-law test. If workers do not meet these tests, generally they are classified as independent contractors.

A person is considered an employee; if he or she:

1. INSTRUCTIONS. Must comply with the employer's instructions about when, where, and how to work.

2. TRAINING. Receive training from or at the direction of the employer. This may include working along with an experienced employee or attending meetings.

3. INTEGRATION. Provide services that are integrated into the business. That is, the success or continuation of the employer's business depends significantly on the performance of certain services provided by the worker.

4. SERVICES RENDERED PERSONALLY. Perform the work personally.

5. HIRING ASSISTANTS. Hire, supervise, and pay assistants for the employer.

6. CONTINUING RELATIONSHIP. Have a continuing relationship with the employer. May exist were the work is performed at frequently recurring, although irregular, intervals.

7. SET HOURS OF WORK. Must follow set hours of work.

8. FULL-TIME REQUIRED. Work full-time for the employer.

9. WORK DONE ON PREMISES. Do their work in a sequence set by the employer.

10. ORDER OR SEQUENCE SET. Must do their work in a sequence ser by the employer.

11. REPORTS. Must submit regular oral or written reports to the employer.

12. PAYMENTS. Receive payments of regular amounts at set intervals.

13. EXPENSES. Receive payments for business and/or traveling expenses.

14. TOOLS & MATERIALS. Rely on the employer to furnish tools and materials.

15. INVESTMENT. Lack a significant investment in facilities used to perform the service.

16. PROFIT OR LOSS. Cannot make a profit or suffer a loss from their services.

17. WORKS FOR ONE PERSON OR FIRM. Work for one employer at a time.

18. OFFERS SERVICES TO GENERAL PUBLIC. An employee does not offer their services to the general public.

19. RIGHT TO FIRE. An employee can be fired by the employer.

20. RIGHT TO QUIT. May quit their job at any time without liability.

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