PRO-608 Employer-Employee Issues: Common Law Factors and Contracting with State Employees

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SCOPE: 

The purpose of this policy is to establish the importance of avoiding employer-employee relationships in state contracting, and to establish official procedure when contracting with a state employee.

An essential intention of a services purchase is the independent entrepreneurial relationship between the contractor and the state, i.e., exclusion of an employer-employee relationship. The existence of a contract does not, alone, negate the existence of an employer-employee relationship.


Common Law Factors

An employee under the Social Security Act is "any person who under the usual common law rules applicable in determining employer-employee relationship has the status of an employee." 

According to the federal Internal Revenue Service (IRS), facts that provide evidence of the degree of control and independence ("common law rules") fall into three categories: behavioral, financial and type of relationship.

Additional information about the factors that fall into these categories can be found at https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee.


Contracting with State Employees

Section 16.417, Wis. Stats., prohibits an individual who is a State of Wisconsin employee or who is retained as a contractor full-time by a state agency from being retained as a contractor by the same or another state agency where the individual receives more than $12,000 as compensation for their services during any 12-month period.

Contracting with a state employee for services where reimbursement for those services will be made in addition to the compensation the employee receives from regular employment with the state should be given careful consideration to ensure compliance with applicable state statutes.

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PRO-608 Employer-Employee Issues: Common Law Factors and Contracting with State Employees