Common Law Employee

What Is a Common Law Employee?

A Common Law Employee is someone who performs services for an employer where the employer has the right to control what will be done and how it will be done. This contrasts with independent contractors, where the payer has the right to control or direct only the result of the work and not what will be done or how it will be accomplished.

Key Features of Common Law Employee

  • Control: The employer has significant control over the employee’s work processes and outputs.
  • Employment Agreement: Typically governed by an employment contract that outlines terms of employment, benefits, and obligations.
  • Benefits Eligibility: Common law employees are usually eligible for benefits such as health insurance, retirement plans, and paid time off.

How Does Common Law Employee Status Work?

  1. Hiring Process: Individuals are hired under conditions that classify them as employees, with clear expectations and control stipulated by the employer.
  2. Tax Implications: Employers are responsible for withholding payroll taxes and contributing to unemployment and workers’ compensation insurance.
  3. Regulatory Compliance: Employers must comply with various employment laws and regulations that protect common law employees.

Best Practices for Managing Common Law Employees

  • Clear Job Descriptions: Provide clear job descriptions that outline duties and expectations.
  • Documented Policies: Maintain comprehensive employment policies that define the employer-employee relationship.
  • Regular Training: Provide training and resources to ensure compliance with employment laws and best practices.


The main difference lies in the degree of control the employer has over the work being done. Common law employees are subject to more direct control by the employer.

Misclassification can lead to legal penalties, back payment of taxes, and other liabilities.

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