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Common Law Employment Definition

June 29, 2016

Mike Kappel

Term Definition:
Common law employment is a legal term for the “traditional” employee status. The IRS has specific criteria that defines whether a worker is a common-law employee. Basically with common law employment, the employer dictates what work the employee is required to do and also has the ability to dictate specifically how the work is to be done.

Extended Definition:
It is crucial that a small business owner correctly determine the status of a worker as either a common-law employee or an independent contractor. The specific IRS guidelines can be found online. The common law rules are categorized as behavior, financing, and type of relationship. Severe penalties can be imposed if an employee is wrongly identified as a contractor.

Related Article:
What Is Common Law Employment?
Payroll Mistake #1: Classifying Workers Improperly
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