What does it mean to be an employee? In a legal setting, such as trying to get workers compensation, it may not be as simple as you think. An employee is not just someone who does work for another. The term “employee” in this situation is a term of art – it has a specific meaning. For example, the gardener who cuts your lawn at your house for a fee is not your employee. S/he is an independent contract, another term of art, with a specific meaning.
While in common (non-legal, non workers compensation) terms, employee is synonymous with servant and includes all natural persons who perform services for another for a valuable consideration, it is not the case in the workers compensation setting. For example, if the gardener, who cut your lawn, cuts his hand on his lawn mower while unloading it from the truck, s/he is not entitled to workers compensation from you. Why? Because a gardener is not your employee; a gardener is an independent contractor.
How can you tell the difference between an employee and an independent contractor? The main difference is whether the “employer” controls the “manner and means of performing the work”. In the case of your gardener, as the homeowner, you do not supply the tools, you do not supply any other implements of work (e.g. gasoline for the lawnmower, other works to help with the work, gloves, or protective goggles, etc). These are all supplied by the gardener.
What other differences are there? As an “employer” you would also withhold taxes and pay the other workers. In the case of an independent contractor, you do not withhold taxes and you do not pay the other gardener workers. These are paid by the gardener who is considered a contractor.
What is an independent contractor? An independent contractor is not an employee because of the absence controlling how they do their job and the absence of supplying the tools and implements of work. The nature of the agreement between the person doing the work and the person wanting the work to be done is different. In addition, the person doing the work tends to have more skill required for performance of the work. They know more about the work than the person wanting the work to be done. Thus, it is also determined by who supplied the tools, whether payment is by the time or by the job, whether work is part of the regular business of the alleged employer, and also the right to terminate the employment at any time.
What is the difference between an employee and an independent contractor? The biggest difference is an injured employee has the right to receive workers compensation benefits in the event of an injury. An independent contractor does not.
Souce: http://www.direct.gov.uk/en/Employment/Employees/EmploymentContractsAndConditions/DG_10027916
