- Hi everyone, I'm Attorney Aden Durham
with 180 Law Co. in Colorado.
And you are watching All Up In Yo' Business.
(upbeat music)
On this episode of All Up In Yo' Business,
We're going to talk about the differences
between being self-employed, freelancers,
contractors, gig workers, and all of these
other terms that are really just different ways
of saying not an employee, but first
please be sure to like, subscribe and share
and check the description for links
to additional information and resources.
Okay, so we hear a lot of different words
and terms that get thrown around in business,
words like freelancer, contractor
or independent contractor, gig worker.
I see this in the comments a lot
on my videos too, people asking things like
how does this apply to freelancers?
So of course it brings up the question.
What is the difference between all of these things?
How do I know if I'm an independent contractor
or a freelancer? And the answer is this,
there is no difference, legally speaking,
they are all the exact same thing.
That's right, self-employed, freelancer,
independent contractor, a 1099 worker,
contract worker, platform worker,
gig worker, side gigs, or side hustles.
They're all exactly the same thing.
And basically they're all different ways
of saying I'm not an employee.
Of course some terms are used more often
depending on the context, we commonly hear things
like freelance writers or freelance designer
the term gig workers we often use when we're referring
to people who work with companies
like Lyft and Uber drivers, we might use side hustle
if we're talking about somebody who does work
on a platform like Upwork or Fiber,
but in the legal and tax world,
they all mean the same thing.
If you perform a service for someone else
whether it be another person or a business
you can be one of two things.
You're either an employee of that person
or you're an independent contractor.
Now, of course, that's not always the case
a hundred percent of the time.
There are some situations where you may be
considered something else, but
for the most part, generally speaking
you are either an employee or an independent contractor.
And if you're an independent contractor
then for all intents and purposes
you are considered self-employed.
I am a lawyer and I own my own law practice.
So of course I consider myself to be self employed.
But when I do legal work for my clients
I'm doing as an independent contractor of my clients
because I'm not their employee, but I could also
call myself a freelance lawyer or even a gig lawyer.
If I wanted to literally, it just means
that I'm not an employee of my clients.
The IRS website gives a definition
of the term independent contractor.
It says, if you're an independent contractor
you are self-employed so congratulations
to all of you freelancers, gig workers
and side hustlers out there, you may not have realized it
but you are actually self-employed
business owners and being self-employed refers
to the lack of an employer, employee relationship.
It means that you are responsible
for your own work and your own expenses, including taxes.
Let's back up a little bit and talk about
what an employer employee relationship is.
First off employees have certain rights
that independent contractors typically
do not have for example, employees have a right
to not be discriminated against
because of their race, color, religion, sex,
national origin, disability, age, or genetic information.
And they have a right to report
that discrimination without the fear
of being punished for doing so.
They have the right to equal pay for equal work.
They have a right to a reasonable accommodations
due to medical conditions or religious beliefs.
They have a right to confidentiality
of certain medical or genetic information
that they might share with their employer.
Employees must be paid at least minimum wage
and are entitled to certain rest and lunch breaks.
Sometimes they're entitled to overtime and holiday pay.
These rights are inherent in every
employer, employee relationship.
And that's not the case with independent contractors.
If I talk to a potential client
and they decide not to hire me
because I'm a woman and they prefer to work
with a man attorney, that's their prerogative.
But if I'm interviewing potential employees
I can't base my hiring decision on the person's gender.
If my employee works more than 40 hours in a week
I have to give them overtime pay.
But if I work more than 40 hours in a week
which believe me is not all that uncommon
I can't go looking for my clients to pay me more
because of that unless of course we have some kind
of contractual agreements saying
that I'll get paid more if I go over a certain
amount of time or whatever the case may be.
Employers also take on a lot of responsibilities
when it comes to employees, the employer
is responsible if an employee is injured
while performing their job duties, that's why we
as employers have workers' compensation insurance coverage.
We have to pay for things like medical expenses
if an employee gets injured on the job
there's this fun Latin phrase in the legal world
called respondeat superior, it translates
into something like let the superior answer.
It means that an employer is legally responsible
and liable for the actions of its employees.
If my employee is performing their job duties
and hurts somebody else I'm legally
responsible and liable for that.
Now, of course it doesn't strictly apply
like that all the time, it doesn't necessarily mean
that I'm always responsible for everything
my employee goes through but generally speaking
employers are responsible and liable
for the acts of their employees.
And that is not the case with independent contractors
or freelancers or gig workers or whatever else.
If my social media manager who is an independent contractor
injures herself or someone else,
while she's setting up my Instagram content calendar,
that's her problem not mine,
or if I'm trying to multitask and I walk
up the stairs while I'm working on a trademark
application and I trip and fall and break my leg,
that is my problem, not my client's problem.
So employers have a lot of responsibilities
when it comes to their employees
but what that responsibility also comes
a lot of control which brings me to the next question.
How do I know if someone is an employee
or an independent contractor?
The number one most important thing
to remember when it comes to employee
versus contractors, is this,
it is not a choice that you get to make.
You do not get to decide if a worker
gets classified as an independent contractor
or an employee and this goes both ways.
If you are the worker, it is not up to you
to decide if you want to be treated
as an employee or as a contractor,
it is a hundred percent completely dependent
on the nature of the working relationship.
There's no single rule or test for determining
if someone is an employee or an independent contractor
unfortunately, I wish there was,
but there are a lot of different factors
that can be taken into consideration
depending on the situation and context.
I'm not gonna go into a whole lot of detail
about that because there is a lot of detail about that.
So I'll save that for another video
but for the most part it comes down
to control and independence.
And for the most part, it is the employer
or the person doing the hiring,
who is responsible for making sure
a worker is properly classified.
The employer will be the one who gets in trouble
if they misclassify an employee as an independent contractor
it's not the employee's responsibility.
When I started hiring my first employee
and administrative assistant, I had a non lawyer
colleague who asked me, why did you decide
to hire them as an employee
instead of a contractor?
And my answer to that question was
because they're an employee, not a contractor.
There was no question in my mind
that this administrative assistant
position would be an employee position.
I would be training her on pretty much
every aspect of her job.
I would be directing her on exactly
what I needed her to do
and how I wanted it to be done
when it needed to be done.
I would be telling her what days
and times she needed to work.
I'll be giving her a laptop and access
to all of the software and programs.
She would need to do her job.
I can't avoid the responsibilities
of being an employer simply by calling her
an independent contractor.
So going back to the whole point
of this video in particular, independent contractors,
gig workers, freelancers, whatever you wanna call it
they're all really different ways
of saying self-employed or not an employee.
And regardless of the term that you want
to attach to it, self-employed means
self-employed, you are taxed the same
as any other self-employed person.
And you're eligible to take the same kinds
of business tax deductions
that any other self-employed person would.
You can form and operate as an LLC or a corporation
just the same as any other business owner can.
And the process for doing so is the same
regardless of what kind of self-employed you are.
It means that you are responsible for yourself.
You are responsible for your own actions.
You're responsible for your own taxes.
You're responsible for deciding how much money
you earn and how you go about earning it.
Everything that applies to self-employed
people applies to you whether you want
to call yourself self-employed,
a business owner, a contractor, a freelancer
a gig worker, or just make up some completely
new term for yourself, it's all the same.
That's all for this episode folks,
drop a comment below, let me know what you think.
And again, don't forget to check the description
for links to additional information and resources.
Thank you all so much for watching I'm Adan Durham
and I'll see you next time.
(upbeat music)