Common Law Employment 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.
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.