INDEPEDENT CONTRACTOR STATUS

The time it takes for an independent contractor to become an employee is the time it takes for him to fall down a ladder.

–Anonymous Workers Compensation employee

One of the most preventable areas of liability deals with employees and independent contractors. How does a business know whether the person working for them is an employee or independent contractor? The Oregon Revised Statute (“ORS”) provides quite a bit of clarity on the issue.

Independent Contractor Status According to ORS 670.600
The Oregon statute demands that all requirements below be met if an individual is to be classified as an independent contractor by the Employment Department, the Oregon Department of Revenue, the Workers’ Compensation Division, or the Construction Contractors Board.

1. An “independent contractor” means a person who provides services for remuneration and who, in the provision of the services:
   1. Is free from direction and control over the means and manner of providing the services, subject only to the right of the person for whom the services are provided to specify the desired results;
   2. Is customarily engaged in an independently established business; and
   3. Is responsible for obtaining other licenses or certificates necessary to provide the services.
2. For purposes of subsection (1)(b) of this section, a person is considered to be customarily engaged in an independently established business if any three of the following requirements are met:
   1. The person maintains a business location:
      1. That is separate from the business or work location of the person for whom the services are provided; or
      2. That is in a portion of the person’s residence and that portion is used primarily for the business.
   2. The person bears the risk of loss related to the business or the provision of services as shown by factors such as:
      1. The person enters into fixed-price contracts;
      2. The person is required to correct defective work;
      3. The person warrants the services provided; or
      4. The person negotiates indemnification agreements or purchases liability insurance, performance bonds or errors and omissions insurance.
   3. The person provides contracted services for two or more different persons within a 12-month period, or the person routinely engages in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.
   4. The person makes a significant investment in the business, through means such as:
      1. Purchasing tools or equipment necessary to provide the services;
      2. Paying for the premises or facilities where the services are provided; or
      3. Paying for licenses, certificates or specialized training required to provide the services.
   5. The person has the authority to hire other persons to provide or to assist in providing the services and has the authority to fire those persons.
3. For purposes of determining whether an individual provides services as an independent contractor:
   1. The creation or use of a business entity, such as a corporation or a limited liability company, by an individual for the purpose of providing services does not, by itself, establish that the individual provides services as an independent contractor.

For further clarity and consultation, give us a call 503.222.9057 or contact us online today.

Located in Portland, Oregon.