From the IRS Website:
Definition of an Employee: “Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.”
Definition of a Contractor: “An individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done”
As defined by the IRS (https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee)
The common conception of the employer-employee relationship is that an employer has the right to dictate key aspects of job function and execution to the employee. This includes setting a schedule and managing the number of hours that each employee works among other job related aspects controlled by the employer. In exchange for this authority, employers are required to provide certain kinds of benefits to their employees such as healthcare and paid time off. However, it is customary that these same benefits not be afforded to those engaging in contractor work since the same authority over job performance and execution is not extended to the payer in this sort of arrangement. The tradeoff being that contractors are granted much greater autonomy in the performance of their contractor duties as well as in their negotiation of compensation. In such a relationship, it is natural for the contractor to take on a greater share of the risk, such as owning and operating their own equipment and assuming responsibility for its use, since they are running what essentially amounts to their own private business practice. This common paradigm is what many nanny state politicians across the country are trying to upend ostensibly in the name of sticking up for the common man. Unfortunately for them, reality paints a far different picture than the façade being constructed by these big government regulators.
I’m talking, of course, about the sharing economy and the reaction of regulators and politicians around the country to its inception. All across the nation, regulatorially inclined legislators have launched a vendetta in an attempt to redefine contract workers, who own and operate their own vehicles providing transportation services at their own convenience with regards to work schedule, as employees for regulatory purposes. Of course this new expansion of the term stretches it well beyond any useful determination of employment, but no matter, the concepts of words and catagorization are quite fluid in the minds of these political zealots. In fact, this all plays in to a larger effort, favored in some political circles, intent on forcing the entire sharing economy to kowtow in the face of the government's regulatory might. The conclusions drawn to justify such a dramatic shift in policy are tenuous at best and the proposed changes themselves would be catastrophic to the sharing economy at large. A myriad of cover stories are offered in an attempt to beguile the public into supporting these policies that run counter to their own self-interests and desires for cheap and efficient transportation options. These include securing benefits for drivers and making sure proper transportation safety protocols are being followed. But the undeniable true reasoning behind these obtrusive proposed “solutions” is that they are being legislated in an attempt to protect other entrenched interests, namely taxi companies and their unions that operate as a powerful political lobby in some municipalities. It is very similar to proposed legislation aimed at limiting other sharing services like AirBnB at the behest of similarly positioned special interests like the Hotel and Lodging lobby. So far, these attempts to stifle this new form of economic engagement by regulators and legislators alike have been met with mixed results. However, we cannot be complacent or we may one day wake up in a society that no longer rewards initiatives that lead to innovative economic developments which ultimately improve the lives of millions of people. Then we will be stuck with less choices and less opportunities as government regulation continues to tighten its stranglehold on continued economic development in favor of protecting bloated established interests from competition.