In this episode of “If Walls Could Talk,” Jill Bloom is joined by Trent Cotney of Adams & Reese. In this discussion, the author discusses an important update on a ruling. And in this final ruling of the Independent Contractor status. What does everyone need to know? 

This ruling just came out this year. What makes an independent contractor an independent contractor? The reason this is important is that if you hire a subcontractor, there is an analysis that has to go on to determine if you’re required to pay them a 1099 or if you need to withhold payroll taxes for a W-2 employee. That analysis has changed over the years. The last time it changed was 2021. 

The ruling came out this year and what it did was rescind the prior ruling and in place adopted a multi-factored test. 

• The first is a look at the opportunity for profit or loss—they’re going to look at if your subcontractor has to be concerned about its own ability to run its business or if it’s entirely dependent on how well you as the contractor performs. 
• The second are the investments in the workers and employees of that entity. Are they investing in safety materials and training? Do they reflect a true business? 
• The third is the degree of the permeance of the relationship. If you only have one subcontractor that only works for you, then they’re really your employees. 
• Fourth is the nature and degree of the control over the work. If you dictate what your sub does day-in/day-out, and how you control every aspect of the their job. “This is a key factor that I have watched most closely. It deals with whether the work performed by a sub or independent contractor is an integral part of their job,” says Cotney. 
• Five is they’re looking for the skill or initiative that sub has. Are they working? Do they exhibit professionalism? Are they working toward mastering their craft? 

All these factors are looked at and one isn’t weighed heavier than the other. 

This ruling is important. Listen to the full video.