Worker Classification and Behavioral Control

Understanding Behavioral Control is very important – and here’s why …

When it comes to the workforce that powers your business there are times when you need to rely on employees and there are times when you can leverage Independent Contractors, and all the benefits that come with them.

This article kicks off a series that covers the regulatory parameters around when a worker can be a contractor and when they must be considered an employee.

I know, this is not the most interesting of topics, so I promise to do my best to keep it interesting and informative. Okay, enough of that! Let’s get back to talking about your workforce and your business.

The first parameter that we will cover today comes courtesy of our friends at the IRS and is Behavior Control.

No – Behavioral Control is not some form of psychological manipulation to get your workers to do whatever you tell them.

Well … it’s not far from that either.

Behavioral Control refers to the level of control that your business exercises over the work performed by your workers.

Essentially, it dictates to what degree you can “tell your workers what to do” … or not. Let’s use my friend Barbara Business-Owner and her independent contractor, Frank Freelancer as an example.

As a freelance web developer, Frank gets to decide how, when, and where he works. He also gets to determine which tools and equipment he uses to complete his web development projects.

However, if Barbara were to hire Emily Employee, who is also a web developer, Emily would not be entitled to this level of autonomy. She would have to work on a computer that Barbara Business-Owner provides, she would have set work hours, and would need to follow project guidelines to complete tasks.

Do you see the difference?

So why is understanding Behavioral Control important?

Correctly allowing for Behavioral Control helps to establish a clear distinction between your employees and your independent contractors. This clear boundary ensures that you’re not in violation of any labor laws due to misclassification.

Let’s say Barbara Business-Owner hired Frank Freelancer and started telling him the hours he should work, and you forced them to work in your office, for work that could have been done remotely.

You could be violating labor laws and may be subject to an audit from a number of different regulatory agencies at the state, federal, and local levels.

Yikes! No one wants that.

How to properly allow for Behavioral Control

You need to be aware of the following four aspects of Behavioral Control …

Autonomy of Work

How much control over work will your worker have?

You have to remember, freelancers are experts in their field! By giving them the autonomy to complete the job however they like, you are acknowledging their expertise. You’ll be able to create a good working relationship when you hand over your sailor cap and let them drive the boat.

Flexibility in Their Schedule

Independent contractors are not tied to set working hours – Frank Freelancer is not working your typical 9-5.

Unlike employees, freelancers organize their work based on availability, personal preference, and project requirements.

Ownership of Tools and Equipment

Have you ever ordered a tech device from Amazon, but the batteries were already included?

Well, independent contractors are kind of like that – they do not rely on you to buy your own equipment.

Freelancers are self-sufficient, and you do not need to provide them with the equipment they need to work with. 

Choice of Work Location

Similar to the flexibility in their schedule, independent contractors can work wherever they want.

Whether that’s on their bed at 02:00 in the morning, at Starbucks on a Wednesday afternoon, or at a Beyonce concert …

Okay, maybe not while hearing ‘Single Ladies’, but you get the picture…

Frank has full autonomy over his work environment, as long as the work gets done and the contractual obligations are met.

Understanding the principles of Behavioral Control is crucial for you as a business owner, so you can correctly engage with your workers. And as you can see, the level of Behavioral Control you have over an employee vs an independent contractor is worlds apart.

Implementing behavioral control correctly is incredibly important to ensure that you are on the good side of the IRS and all those other regulatory agencies.

I’m sure you don’t lie in bed just dreaming of the day you get an audit and we don’t want that for you either! To further explore if your Behavior Control parameters are meeting regulatory requirements,  contact us today to make an appointment.

And stay tuned for our next article about the Financial Control of contractors vs. employees.

ClearPath is a leading Human Resources Outsourcing company focusing on the contingent labor market. We’re committed to helping business owners stay compliant and minimize the risks associated with their contingent labor requirements.

No Legal Advice Intended. This article includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues.