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    Employee vs Contractor (Recruitment, Selection and Placement)

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    "In exchange for these advantages of using independent contractors, the employer substantially loses the right to control the contractor. In particular...the employer cannot dictate where, when, or how the work is to be done."

    Using the attached articles below, discuss your opinion of the FedEx/IRS case in light of that quote from my textbook above. Include your own experiences with independent contractors, if applicable.

    Background information:

    Independent Contractors

    As part of its staffing plan, the employer may hire independent contractors. An independent contractor is not legally considered an employee, however. Therefore, the rights and responsibilities the employer has toward the independent contractor are different from those for its employees. Classifying and using a person as an independent contractor frees the employer of the tax withholding, tax payments, and benefits obligations it has for employees. It may also reduce employer exposure under laws and regulations governing the employment relationship, such as nondiscrimination (e.g., Civil Rights Act) and wage and hour laws.

    In exchange for these advantages of using independent contractors, the employer substantially loses the right to control the contractor. In particular, while the employer can still control expected results, the employer cannot dictate where, when, or how work is to be done. Thus, the employer loses control over the means (work processes, tools, equipment, work schedules, and so forth) by which the work is performed.

    Beyond this crucial distinction, the line of demarcation between what constitutes an employee and what constitutes an independent contractor is often fuzzy. Numerous other factors come into play. For example, a person is more likely to be considered an independent contractor than an employee in the following situations.

    Working in a distinct occupation or business
    Working without supervision or oversight from the employer
    Paying one's own business and travel expenses
    Setting one's own work hours
    Possessing a high degree of skill
    Using one's own tools, materials, and office
    Working on a project with a definite completion date
    Working on relatively short projects
    Being paid by the project or commission rather than by the time spent

    These examples are based on common-law interpretations and on a list of 11 criteria used by the Internal Revenue Service (IRS) to classify people as employees or independent contractors. Misclassifying people as independent contractors can result in substantial tax liabilities and fines for the employer. The IRS has stepped up its audit of employees to combat a trend of classifying people as independent contractors in order to gain staffing flexibility and save on labor costs.

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    Solution Preview

    When I read the FedEx article, I was surprised to find out that the drivers of the FedEx Ground shipments are not employees of FedEx. In my opinion, FedEx is getting a lot of benefits from this arrangement. The drivers have more characteristics of employees than independent contractors. Most contractors set their own hours and use their own clothing, vehicles, and other supplies. FedEx contractors wear uniforms of the company and apparently do not set their own hours because they have to ...

    Solution Summary

    The solution discusses employee vs. contractor including recruitment, selection and placement.