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Independent contractor could be redefined

July 13, 2000
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WASHINGTON, DC — Representatives Amo Houghton (R-NY) and Jerry Kleczka (D-WI) and 95 cosponsors are attempting to pass H.R. 1525, “The Independent Contractor Clarification Act,” which would take the current 20-factor test, which is considered cumbersome and inexact, to a clear, three-point test for determining employment status.

The three-point independent contractor test would consist of the following criteria:

1. The service provider controls and directs the manner of, and means used in, the performance of services for a service recipient.

2. The service provider makes substantially similar services available to others and is not precluded from doing so by the service recipient.

3. The service provider has the potential to generate profit and risk significant loss beyond the risk of not being paid.

In order to be classified as an independent contractor, an individual must meet all three of the above criteria. Individuals failing to meet one or more of the requirements would be classified as an employee.

H.R. 1525 is likely to be added to a tax bill that’s soon to come, and is currently being looked at by the Ways and Means Committee.

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