Under common-law rules, anyone who performs services for a business is their employee if the business can control what will be done and how it will be done. This is the case even when the business gives the person freedom of action. What matters is that the business has the right to control the details of how the services are being performed.
Why does this make a difference to a business? Because generally it is less expensive and with less red tape to hire independent contractors in lieu of hiring employees. But there a consequences of improperly treating an employee as an independent contractor. If the business classifies an employee as an independent contractor and there is no reasonable basis for doing so, then the business may be retroactively held liable for employment taxes, workman's compensation, and other employee benefits for that worker.
The classification as an independent contractor may be challenged by the IRS, the State Employment Tax Department and the State Department of Labor.
Pages in the Employees topic group