Robin's Ruminations

Parts one and two covered supervision and separate business.  Part three is very similar to part two.

3.  Previously Established Business

The test gives us a single question to answer for this part.

Do they have an established, independent business that existed before you hired?  This is similar to test #2 but remember that, according to the rules, you must answer "yes" to all 6 of the tests in order to qualify a worker as an IC.  The question presented here may make it a little difficult to answer "yes" to it if you aren't careful.  As I read this test and speculated in my mind about its implementation by government, I reached the conclusion the contractee (that's you if you use IC's) can only qualify a worker as an IC if you can demonstrate the worker had a full fledged business before you contracted with them.

L&I suggests this demonstration can be made by showing the IC had other customers or was advertising for customers before you contracted with them.  I speculate that other forms of demonstration could be in the form of business licenses, proofs of registration with government agencies such as L&I and Employment Security, 1099's from existing clients, etc.  

The trap that exists in this test is the reference to the past - "... that existed before you hired?"  If you exercise some care I think this is quite doable in many situations.  Make certain a potential contractor has his government registrations in place, has his own business cards, has some kind of advertising page or brochure he can hand out, etc, before he signs your contract and before you assign any work to him.  

In essence, the contractor needs to be able to compete with you and, perhaps, has done so in the past.  If you don't allow an IC the ability to do this then you are removing some of their independence and making them appear to be an employee.  

If the server is an employee you have control but must pay taxes and be subject to various work place rules.  On the other hand, if the server is an IC you may lose clients to him.  I'm aware of a situation in the Puget Sound area where this latter actually happened.  An IC took away several accounts from the company with whom he was contracting.  The company survived but was hurt financially.  

There is always a trade off.  There is no free lunch.