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LSDefine
Simple English definitions for legal terms
contractor
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A quick definition of contractor:
A contractor is a person or company that agrees to do a job for someone else. They are different from employees because they decide how to do the work and are responsible for getting the job done. Sometimes it's hard to tell if someone is a contractor or an employee, but it's important to know because it affects things like taxes and benefits. Courts have tests to figure out if someone is a contractor or an employee, and they look at things like who controls the work and how much the worker depends on the employer.
A more thorough explanation:
A contractor is a business or entity that agrees to perform work under the terms of a contract. Unlike employees, contractors are responsible for how the work is performed and are obligated to provide a specific result for the employer. However, the distinction between an employee and contractor can be a legal issue due to tax and benefits implications.
For example, if a company hires a contractor to build a new office building, the contractor is responsible for hiring workers, purchasing materials, and completing the project within the agreed-upon timeframe and budget. The company is not responsible for providing benefits or paying taxes for the contractor's workers.
However, if the company hires an employee to perform the same work, the company is responsible for providing benefits and paying taxes for the employee. Additionally, if the employee causes harm to someone while performing their job duties, the company may be held liable for the employee's actions.
Courts use tests to determine whether a worker is an employee or contractor. For example, in New Jersey, courts use the "control test" and "relative-nature-of-the-work test." The control test looks at whether the employer has the right to direct how the work is done, while the relative-nature-of-the-work test looks at whether the worker is an integral part of the employer's business and whether the worker is economically dependent on the employer.
Similarly, in California, a worker is considered an employee unless they meet three criteria: they are free from the employer's control and direction, the work performed is outside the employer's usual business, and the worker is engaged in an independently established trade or business.
Overall, contractors are distinct from employees in that they have more control over how the work is performed and are responsible for providing a specific result for the employer. However, the distinction between an employee and contractor can have legal and financial implications for both parties.