Independent contractor or employee: Avoid pitfalls by understanding the law

Independent Contractor Guide

Rights to workers' compensation insurance coverage

If L&I audited your business today, would the auditor find you should have paid workers' comp on your independent contractors? L&I auditors often find this mistake, and the results can be expensive.

Many business owners — and even their bookkeepers — believe that anyone who passes the IRS's independent contractor test also passes the independent contractor test in state law. However, they are not the same.

L&I has an independent contractor guide (F101-063-000) to help everyone better understand Washington's 6-point test (7 points for construction contractors).

The booklet:

  • Takes you step by step through the independent contractor test in the same way L&I auditors approach it.
  • Provides helpful examples of when a person will and won't pass the test.
  • Tells you the types of documentation you'll need as evidence that your independent contractor meets the test.

Read the guide online, print it, or order copies (F101-063-000).

Para ver esta publicación en español, haga clic en el enlace, Guía para el Contratista Independiente (F101-063-999).

Covered Employees

Rights to minimum wage and overtime

Understanding the laws around minimum wage and overtime when working with or as an independent contractor will also help you avoid costly audits.

Bona fide independent contractors are exempt from Washington's Minimum Wage Act (WMA) because that person is not "employed." However, employers cannot avoid the law by merely referring to an employee as an "independent contractor."

The WMA also requires employers to pay overtime wages of at least 1.5 times an employee's regular rate of pay for hours worked in excess of 40 in a 7-day work week.

For more details about minimum wage and overtime related to independent contractors and covered employees, read this fact sheet (F212-250-000) or contact L&I's Employment Standards staff at 1-866-219-7321.

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