independent contractor (redirected from Economics and Social Policy)

independent contractor

One who is hired to reach a certain goal or perform a certain task,but who has the ability and the right to determine the methods and times for reaching that goal or task,so long as it is not illegal and is within the limits of the contract.This is an important concept because

1. Employers must take withholding taxes and pay matching taxes for employees but not independent contractors. The IRS has significantly tightened the definition of indepen- dent contractor so that most work relationships do not qualify. Under certain circum- stances, real estate agents have been held to be employees for tax purposes.

2. If an independent contractor is negligent or commits an intentional tort, then the person who hired the contractor is not generally liable for the resulting damage. If an employee did the same thing, the employer would be liable so long as the employee was acting within the line and scope of his or her employment, which is usually a fairly easy hurdle for plaintiffs' lawyers to overcome.

3. An exception exists for the general rule of nonliability for the actions of an independent contractor, and that is in the area of real estate brokerage. Most real estate agents are independent contractors working for the broker. Real estate licensing laws, however, usu- ally hold the broker responsible for the actions of agents.

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Independent Contractor

A taxpayer who contracts to do work according to his own methods and who is not subject to control except as to the results of such work. An employee, by contrast, is subject to the control of the employer as to the methods to be used to obtain the desired results.