In general, real independent contractors are people in business for themselves who do work for multiple companies on a contract basis. The companies paying true independent contractors generally are not required to pay them overtime pay, minimum wages, health insurance, or other employment benefits.
For this reason, companies sometimes hire workers and call them “independent contractors” even though in reality the workers are employees. This often saves the companies money, by depriving the workers of overtime compensation, minimum wages, and other employment benefits, like health insurance, unemployment insurance, and worker’s compensation.
This denial of pay rights and employment benefits is lucrative to companies, but harmful to workers who are true employees incorrectly labeled “independent contractors.”
Regardless of what your work calls you, and regardless of whether you signed an agreement stating you are an “independent contractor,” you could be an employee entitled to overtime compensation, minimum wages, and other employment benefits.
Whether you are an employee or an independent contractor depends on several factors. Federal law emphasizes the “economic realities” of your situation, that is, whether you are “economically dependent” on the business you work for or are, as a matter of economic reality, in business for yourself. The factors include the degree of control your employer exercises over your work, your investment in equipment, materials or other workers, your opportunity for profit or loss besides your regular pay, the degree of specialized skill required, the permanency of your working relationship, and the extent to which your work is integral to the employer’s business. IRS guidelines and Virginia law use similar factors.
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