State (PA)

https://www.uc.pa.gov/employers-uc-services-uc-tax/covered/Pages/Employee-or-Independent-Contractor.aspx

A worker is considered to be an employee unless proven otherwise. To be an independent contractor both of the following must be shown to the satisfaction of the department:

• The individual has been and will continue to be free from control or direction over the performance of the services involved, both under the contract of service and in fact, and
• As to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.

If an individual performs services in the construction industry, the Construction Workplace Misclassification Act (Act 72), imposes additional criteria that must be met for the individual to be recognized as an independent contractor. Under Act 72, all of the following requirements must be satisfied:

• The individual has a written contract to perform the services,
• The individual is free from control or direction over the performance of the services involved both under the contract of service and in fact, and
• As to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.

To show that an individual in the construction industry is customarily engaged in an independently established trade, occupation, profession or business, Act 72 requires that the following be shown:

1. The individual possesses the essential tools, equipment and other assets necessary to perform the services independent of the person for whom the services are performed;
2. The individual's arrangement with the person for whom the services are performed is such that the individual shall realize a profit or suffer a loss as a result of performing the services;
3. The individual performs the services through a business in which the individual has a proprietary interest.
4. The individual maintains a business location that is separate from the location of the person for whom the services are being performed.
5. The individual either (a) previously performed the same or similar services for another person in accordance with (1), (2), (3) and (4) while free from direction or control over performance of the services, both under his contract and in fact; or (b) holds himself out to other persons as available and able, and in fact is available and able, to perform the same or similar services in accordance with (1), (2), (3) and (4) while free from direction or control over performance of the services;
6. Maintains liability insurance during the term of the contract of at least $50,000.

IRS

https://www.irs.gov/taxtopics/tc762

For federal employment tax purposes, the usual common law rules are applicable to determine if a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker and the business. You should consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.