The Affordable Care Act and Independent Contractors

April 21, 2015

The Affordable Care Act requires all employers with 50 or more full time and/or full time equivalent employees to provide health insurance to at least 95% of those employee and dependents up to age 26, or face costly monetary penalties. Because of this, the classification of your employees has become more important than ever. Anyone your business classifies as an independent contractor would not count toward your full time employees. However, independent contractors are often misclassified. The Internal Revenue Service (IRS) applies an evaluation of 20 different criteria to determine if someone can be classified as an independent contractor.

A person is usually not an independent contractor if:
  • The employer retains the right to require compliance with their instructions.
  • Worker training dictates services be performed in a particular manner.
  • The worker’s services become incorporated into the employer’s business operations.
  • Services must be performed by a specific individual in the company the employer has hired.
  • The employer hires, supervises, or pays assistants for the worker.
  • There is an ongoing business relationship between the employer and the worker.
  • The employer has specified set hours for the worker.
  • The individual is working for the employer close to full time, and therefore does not have the freedom to take on outside work.
  • The worker is doing work on the employer’s premises.
  • The employer is determining the order in which the work is done.
  • The employer requires regular status reports from the worker.
  • The worker is paid hourly, weekly, or monthly, rather than a flat fee for the job as a whole.
  • The employer is paying the worker’s expenses.
  • The employer is providing the worker’s tools.
  • The employer has the right to discharge the worker.
  • The worker can terminate the business relationship at any time without incurring liability.
A person is usually an independent contractor if:
  • The worker is financially invested in the facilities they are using to do the work.
  • A worker can incur profit or loss as a result of the services they provide.
  • The worker is performing services for multiple businesses simultaneously.
  • The worker makes their services available to the public on a regular and consistent basis.