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INDEPENDENT CONTRACTOR VS EMPLOYEE
IS THE CAPTAIN AN INDEPENDENT CONTRACTOR OR AN EMPLOYEE?

To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. All evidence of control and independence must be considered.

Facts that provide evidence of the degree of control and independence fall into three categories: behavior control, financial control, and the type of relationship of the parties.

Behavior control - Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of

1) Instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Reg. Section 31.3401 ( c ) - 1 (b). (The employer does not instruct the captain nor does the captain look to the owner for instruction.

2) Training the business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods. The owner does not train the captain.

Financial control- Facts that show whether the business has a right to control the business aspects of the worker's job include

1) The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than employees. On average 20% of the captains income is business expenses that are not reimbursed. (professional license updates and renewals, auto expenses, mal practice insurance, etc)

Type of relationship: Facts that show the parties' type of relationship include

1) Written contracts describing the relationship the parties intended to create.

Employer may rely upon a long-standing recognized practice of a significant segment of the industry in which the employer is engaged whether or not the practice as uniform throughout the entire industry. A significant segment of the industry is defined as 25% of the industry. Rev Proc 85-18. (Over 90% of my clients are corporations. You may call the marine industries association and ask them as well.

Generally, an employment relationship exists if the employer has the right to control and direct the individual, not only as the result to be accomplished by the work, but the details and means by which the results are to be accomplished. Reg. Section 31.3401(c ) - I (b) Lawyers, physicians, and other professionals are typically not employees. Just as with the lawyer and the physician the employer is in total reliance upon the professionalism of the worker.

Right to Quit - One of the 20 test outlined. An employee can quit his job as any time without incurring liability. IRS Publication 937 & Rev. Rul. 87-41, 1987-1 C.B. 296. The captain does not have the right to quit as an employee. The degree of responsibility not only to the owner, but to maritime law requires the captain to see the yacht , crew, and passenger to safety.

A yacht captain is an unique worker. He has his own professional license, and with the responsibilities both with licensure and in common law (captain goes down with the ship). The captain has the responsibility of all the crew, over life and death; all this combines to make him not an employee. No one has direction and control over a captain. The captain directs and controls the yacht and all the crew, even the owner. The captain is personally responsible for all. In reviewing every other relationship, one is hard pressed to think of another relationship with as much responsibility, and all of which are independent contractors like the physician and the lawyer.



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