Employee classifications identify how the Fair Labor Standards Act (FLSA) apply to workers and what benefits they are legally entitled to or not. Because of this, the language we use around it matters! The terms we use to define workers can get thrown around interchangeably even though they’re actually different. Let’s define the language around independent contractor, gig worker, and employee.
Merriam Webster defines the gig economy as “economic activity that involves the use of temporary or freelance workers to perform jobs typically in the service sector.”
The service sector piece is one of the main cues that indicates someone is a gig worker. Ride-sharing drivers and grocery delivery people are good examples. Their “gigs” are on-demand. It usually goes something like this: a customer coordinates a one-time service (such as a grocery cart full of food delivered to their doorstep) through a company like Uber or Instacart. They facilitate the transaction through an app and a worker accepts the task.
The gig worker, then, is the person who does the driving or shopping/delivering. They might also be an independent contractor, but it’s not the same thing.
Independent contractors are business owners who engage in a contract (either with another business or with an individual) to provide a service. They receive payment specifically for the work they perform and according to agreed-upon terms. Unlike a regular employee, they can pick and choose clients and regularly move from client to client.
Here are some of the key hints that someone is an independent contractor:
- They have a specific skill set and a legally-established business entity
- They report business income to the IRS and pay self-employment taxes
- They perform work that is not central to their client’s main line of business
- Their work is project-oriented and is typically completed in a specified amount of time
Okay, so employees are a whole different thing. In short, they’re employed by a company and are entitled to the benefits and regulations that go along with that. There are multiple designations that can apply to employees–part time, full time, exempt, non-exempt. We’ll go into more of that next week.
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