Independent Contractor Tests in Oregon

This post summarizes the relevant tests for independent contractors in the State of Oregon. This information comes from the linked resources scattered in many places on government websites.

Note: What's in a Name?

Calling a worker an independent contractor does not make it so. Employers have the burden of proving independent contractor status with evidence.

Employment is the default setting for any work for pay in Oregon. That means courts and state regulatory agencies start with the assumption that any work for pay is an employment relationship. The employing business must establish that the worker truly meets the criteria required of an “independent contractor.”

There are three primary tests, based on context:

Oregon Independent Contractor Test #1
(Department of Revenue, the Employment Department, the Construction Contractors Board and the Landscape Contractors Board)

Oregon Revised Statute (ORS) 670.600 (summarized below) defines “independent contractor” for the following state agencies:

•    Department of Revenue (taxes)
•    Employment Department (unemployment)
•    Construction Contractors Board
•    Landscape Contractors Boards
ORS 670.600: 

For independent contractor status, the employer must show that the worker:

1.    Is free from direction and control, beyond the right of the service recipient to specify the desired result, AND

2.    Is licensed under ORS 671 or 701 (State Landscape Architect Board or Landscape Contractors Board and State Board of Architect Examiners  or Construction Contractors Board) if licensure is required for the service, AND

3.    Is responsible for other licenses or certificates necessary to provide the service AND

4.    Is customarily engaged in an “independently established business.”
To qualify under the law, an “independently established business” must meet 3 out of the following 5 criteria:

1. Maintain a business location that is:

    a. Separate from the business or work location of the service recipient; or
    b. In a portion of their own residence used primarily for business.

Establishing a business entity such as a corporation or limited liability company, does not, by itself, establish that the individual providing services will be considered an independent contractor.

2.    Bear the risk of loss, shown by factors such as:

    a.    Entering into fixed price contracts;
    b.    Being required to correct defective work;
    c.    Warranting the services provided; or
    d.    Negotiating indemnification agreements or purchasing liability insurance, performance bonds, or errors and omissions insurance.

3.    Provide contracted services for two or more different persons within a 12-month period, or routinely engage in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.

4.    Make a significant investment in the business through means such as:

    a.    Purchasing tools or equipment necessary to provide the services;
    b.    Paying for the premises or facilities where the services are provided; or
    c.    Paying for licenses, certificates or specialized training required to provide the services.

5.    Have the authority to hire and fire other persons to provide assistance in performing the services.

Resources: Website

Oregon Independent Contractor Test #2
(Bureau of Labor and Industries (BOLI))

When evaluating whether a person has performed work as an employee or an independent contractor, BOLI applies the “economic realities” test:

  • The extent to which the work performed by the worker is an integral part of the alleged employer’s business.
  • The degree of control exercised by the alleged employer.
  • The permanency of the relationship
  • The skill and initiative required to perform the work.
  • The degree to which the worker's opportunity for profit and loss is determined by the alleged employer
  • The extent of the relative investments of the worker and alleged employer.

Resources: BOLI Website

Oregon Independent Contractor Test #3
(Workers Compensation Board)

Independent contractors under the workers’ compensation law meet the following criteria:

  • Provide a service under a contract without direction and control, or without others having the right to direct and control the provision of those services.
  • Control how the service is provided, who provides it, and the means of accomplishing it.
  • Are free from actual direction and control and free from another’s right to direct and control.
The creation or use of a business entity, such as a corporation or partnership, does not by itself establish that the entity is an independent contractors.

The Workers' Compensation Board provides this list of "common characteristics" of an independent contractor:

  • Furnishes equipment and has control over that equipment. 
  • Submits bids for jobs, contracts, or fixes the price in advance. 
  • Has the capacity to accept or refuse an assignment or work. 
  • Pay relates more to completion of a job. 
  • Work is usually intermittent with an expected start and end date. 
  • A firing can give rise to suit for breach of contract. 
  • Risk of capital – money invested in the work, a potential for loss or profit. 
  • Employment of others – hires and pays employees or subcontractors. 
  • Performs services for more than one person or business; has multiple customers. 
  • Economic independence – does not depend on any one client or customer for income. 
  • Holds oneself out as a contractor – represents to the public that this is a business.
  • Separate phone, business cards, and business advertising. 
  • Works under own trade name and not the trade name of person or business contracting the services. 
  • Performance affects own goodwill but not the person contracting the services. 
  • Owns an existing business that can be sold for more than the price of the assets. 
  • Has credit with suppliers, business lenders, and other vendors. 
  • Maintains insurance coverage for liability, errors, and omissions. 
  • Registered as an assumed business name or other legal business entity.
  • Has a local business license. 
  • Files taxes as self-employed. 
  • Performs services for customers of his or her choosing. 
  • Is not a part or component or anyone else's business.
Resources: Workers' Compensation Board Website