Problem 1. Is Mary an independent contractor or an employee? Describe the factors that led to your determination. Define independent contractor and employee.
According to the scenario I find that Mary is an independent contractor for the reason that her obligation to the employer is on a project-by-project basis and once the project is completed both parties understand that the relationship can either end or become extended depending on the needs of the organization. The factors that led to my determination that Mary is an independent contractor is that she was required to use company materials and adhere to company work schedules however she was not considered an employee more of an external liaison who functions within the realm of an internal framework. The contract between Mary and the organization was based on obtaining service for a particular project within a certain time frame. For example, ELance is an organization that joins independent contractors and organizations together to complete specific projects on a timeline in exchange for compensation for work completed, however, no benefits are awarded just monetary compensation and the ability to establish an acceptable reputation as a high-quality service provider. An employee, on the other hand may or may not have a contract unless he/she is an executive or another corporate entity.
An independent contractor is an individual who functions as a self-employed individual who provides products/services for organizations. This type of individual may work for an organization as a separate entity from the organizations primary day-to-day operations. An independent contractor possesses a contract with the organization that is a working agreement of what is expected of both parties in the agreement such as; the nature of the project, deadlines, timelines, etc. It is also understood that an independent contractor does not receive benefits from the organization as an employee, the independent contractor and the employer agrees to a set price for services rendered, it is safe to assume that an independent contractor operates as an organizations personal vendor for whatever services the organizations requires. The independent contractor is responsible for his/her own tax obligations, medical benefits, expenses, transportation, etc.
An employee is an individual who is hired to perform a job function for a lengthy period of time. The employee undergoes an extensive recruiting process which may include the following: application, interview, and employee selection process, background check, in order to determine eligibility for employment. Instead of utilizing a contract similar to an independent contractor, and employee and employer have what is known as a collective bargaining agreement in which case an employee offers his/her skills, knowledge, and contributions in exchange for salary/wages and benefits. The rules of acceptable employee/employer conduct is governed by the Fair Labor Standards Act (FLSA). "An employee works within a functional area or department such as marketing or Human Resources. An employee has a boss, the person he or she reports to and takes direction from, usually a manager or supervisor. The employee has a work station or office in which he or she accomplishes the job. The employer supplies the employee with the tools and equipment necessary to perform work such as a computer, telephone, and supplies." (Heathfield, 2010).
Problem 2. Has the employer/employee relationship changed over the course of time? If so, how? How does the IRS 20 factor test relate to this?
The employer/employee relationship was subjected to some major changes due to the recent transition in the economic climate. Although the organization still needed Mary's services, hiring an outside sources was not a cost-effective option for the organization. If the organization was not facing economic turmoil it is my belief that the relationship between the employer and Mary would still be in effect to date.