Independent Contractors

Persons who follow an independent trade, business or profession in which they offer their services to the general public usually are considered independent contractors and not employees. However, whether such persons are employees or independent contractors depends on the law and facts applicable to each case. For example, Minnesota law considers nonresidents who perform personal or professional services in Minnesota to be employees for certain purposes, such as income tax withholding. This is true even though under federal law they would be considered self-employed independent contractors. Similarly, certain individuals such as direct sellers and real estate agents are by statute considered independent contractors for federal tax purposes if certain conditions are met.

In general, the individual will be considered an independent contractor if the business entity obtaining the person’s services has the legal right to control the result of the work but does not have the legal right to control the manner and means of accomplishing the result.

Independent contractors offer their services to the public through the exercise of an independent business enterprise. An independent contractor is responsible for making his or her own estimated tax payments and paying self employment (Social Security and Medicare) tax. The business that obtains the independent contractor’s services generally is not required to obtain workers’ compensation insurance, withhold taxes or pay employment taxes on behalf of the independent contractor. Independent contractors generally do not receive benefits such as paid holidays, health insurance or sick pay from the business that obtains their services.

CREDITS: This post is an excerpt from An Employer’s Guide to Employment Law Issues in Minnesota, originally produced through a collaborative effort between the Minnesota Department of Employment and Economic Development and Lindquist & Vennum, P.L.L.P.

This post is part of a series of posts on hiring an employee in Minnesota.