Employee or Independent Contractor?

As an employer, how do you determine whether or not a person doing work for you is an employee or an independent contractor, for worker’s compensation purposes? It is important for employers to make sure they are covered if this person is injured on the job.

Wisconsin law (s. 102.07 (8), Wis. Stat.) states that a person must meet a nine-point test before being considered an independent contractor. Even if the contractor over this person or another regulator (i.e., the federal government) considers this person an independent contractor, he or she must meet and maintain the following requirements:

1. Maintain a separate business
2. Holds or has applied for a federal employer identification number with the federal internal revenue service or has filed business or self-employment income tax returns with the federal internal revenue service based on that work or service in the previous year; [Note: When requesting a Federal Identification Number (FEIN) from the IRS, you must inform the IRS that you are required by Wisconsin Worker’s Compensation law to obtain a FEIN. A social security number cannot be substituted for a FEIN and does not meet the legal burden of s. 102.07 (8), Wis. Stat.]
3. Operate under specific contracts
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 or obligations
9. Be in a position to succeed or fail if business expense exceeds income.

If you have questions regarding the Wisconsin Worker’s Compensation Act, call or write the Worker’s Compensation Division, Bureau of Insurance Programs. The Worker’s Compensation Division is located in the GEF 1 State Office Building, Room C100, 201 East Washington Avenue, Madison. The mailing address is P.O. Box 7901, Madison, WI 53707-7901. The telephone number is (608) 266-1340, 866-265-3142 TTY or you can reach them by fax at (608) 266-6827.