A general contractor pays a subcontractor $45,000 annually and provides all tools, sets work hours from 7 AM to 4 PM, and requires the worker to follow company safety procedures. The contractor should classify this worker as:
Correct Answer
C) An employee because of the high degree of control exercised
Despite being called a subcontractor, the high degree of control (providing tools, setting hours, requiring compliance with procedures) indicates this worker should be classified as an employee under IRS and Department of Labor guidelines.
Why This Is the Correct Answer
The IRS and Department of Labor use a control test to determine worker classification. When a contractor provides all tools, sets specific work hours (7 AM to 4 PM), and requires compliance with company safety procedures, this demonstrates significant behavioral and financial control. These factors clearly indicate an employer-employee relationship regardless of what the worker is called. The degree of control exercised by the general contractor over how, when, and where the work is performed is the determining factor for classification.
Why the Other Options Are Wrong
Option A: Either classification is acceptable with proper documentation
Worker classification is not a matter of choice or documentation preference. Federal and state laws provide specific criteria that must be followed. The IRS and Department of Labor have established tests that determine classification based on the actual working relationship, not on what documentation the parties prefer to use.
Option B: An independent contractor because of the annual payment amount
The payment amount or method (annual vs. project-based) is not the determining factor for worker classification. A worker can be paid annually and still be classified as either an employee or independent contractor. The key factors are the degree of control exercised and the nature of the working relationship, not the compensation structure.
Option D: An independent contractor because they are called a 'subcontractor'
The title or label given to a worker does not determine their legal classification. Calling someone a 'subcontractor' does not automatically make them an independent contractor. The actual working relationship and degree of control exercised determines classification, regardless of terminology used in contracts or job titles.
Memory Technique
Remember 'CONTROL = EMPLOYEE': When you Control tools, Control hours, and Control procedures, the worker is an Employee, not an independent contractor.
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