If I hire a handyman for my rentals, will that person be considered an employee?
It depends on the circumstances of the hiring arrangement. Worker classification is an important decision for business and tax purposes. You will want to define the nature of the work to done and how the work will be done before you decide to hire an employee or engage an independent contractor (IC). While many tasks can be satisfactorily performed equally by either an employee or an IC, the use of one class of worker over the other can be a matter of employer preference. However the classification of the worker is not a matter of preference. When a worker is hired, it is the business relationship that will exist between the employer and the individual performing the work that will be the determining classification of employee or IC, not a label or preference. The classification decision must be weighed according to all facts.
The type of relationship between the parties is evidenced by the (1) written contracts describing the relationship the parties intended to create; (2) whether or not the business provides the worker with employee-type benefits such as insurance, pension plan, vacation pay or sick pay; (3) the permanency of the relationship; and (4) the extent to which services performed by the worker are a key aspect of the regular business of the company.
Generally an employee is an individual who performs services that can be controlled by the employer. That is, the employer gives instructions to the worker regarding when and where to do the work, the tools to use, the order or sequence for the work to be performed, and training to perform the work in a particular manner. An employer exercises financial controls over an employee by how the worker is paid, the extent to which the worker realizes profit or loss, the extent to which the worker can make his services available to others in the relevant market, and the extent of the worker’s investment in equipment. If the employer exercises behavioral and financial controls over the worker, the worker is considered an employee.
The Fair Labor Standards Act (FLSA) governs minimum wage and overtime pay for employees in an employment relationship. To determine if a worker is an employee under the FLSA definition, the employer must apply an economic reality test to the business relationship. If the worker is dependent upon the employing business for continued work as a matter of economic reality the more likely the worker is an employee.