Construction worker: employee or subcontractor? The IRS examples

The question underneath

Before the examples, the publication restates the test. In an employee-independent contractor determination, all information providing evidence of the degree of control and the degree of independence must be considered, grouped into behavioral control, financial control and the type of relationship. The examples are the IRS showing that reasoning applied to a trade. They are fact patterns, not rules, and changing one fact can change the answer. Our common-law rules page sets out the factors; this page reads the construction examples against them.

Example 1: Jerry Jones, employee

Jerry agrees to supervise a house remodel for Wilma White. Wilma pays suppliers directly for materials, carries liability and workers’ compensation insurance covering Jerry and the people he engaged, pays an hourly rate, and supervises almost constantly. Jerry cannot move assistants to other jobs or work other jobs himself, and takes no responsibility for finishing or contractual liability if the work is not completed. The IRS concludes Jerry and the assistants are employees. Control, hourly pay, no investment, no risk and exclusivity all point the same way.

Examples 2 and 3: Milton Manning and Wallace Black, employees

Milton is an experienced tile setter who works full time at construction sites for a corporation under an oral agreement. He uses his own tools, but works in the order and to the specifications the corporation designates, is paid piecework, is inspected often, has no business place, does not seek similar work for others, and either side can end the arrangement at any time. Employee. Note that owning tools did not save him, and piecework pay did not make him a contractor.

Wallace Black supplies construction labor for a group of houses and owns the tools and equipment. But he works as carpenter and mechanic at an hourly wage, acts as superintendent, engages helpers whom the company may select, approve or discharge, and the company pays all construction costs, inspects frequently and pays Wallace a percentage of cost when a house is done. He is not responsible for defects or wasteful operation. Wallace and his assistants are employees. Even a worker with tools who hires others can be an employee when the business holds the control and the financial risk.

Examples 4 and 5: Bill Plum and Vera Elm, contractors

Bill Plum contracts with Elm Corporation to complete roofing on a housing complex under a signed flat-amount contract. He is a licensed roofer who carries workers’ compensation and liability insurance under the business name Plum Roofing, hires roofers whom he treats as his own employees, and is responsible for paying for repairs if the roofing is faulty. He is an independent contractor. The signals are a fixed price, a business with its own insurance and staff, and the risk of loss.

Vera Elm, an electrician, submits an estimate of $16 an hour for 400 hours and is to receive $1,280 every two weeks for ten weeks. The publication says that is not payment by the hour: if Vera works more or fewer hours, she still receives $6,400. Vera also does electrical installations for other companies obtained through advertisements. Independent contractor. A job estimate expressed in hours does not by itself create an hourly employee; what matters is that the price is fixed and the worker markets to others.

The trucking example

Rose Trucking contracts to deliver material for Forest, Inc. at $140 per ton and is not paid for articles not delivered. Jan Rose, who operates as Rose Trucking, may lease another truck and engage a driver to finish the contract. Jan pays all operating expenses including insurance, owns or rents all equipment and is responsible for all maintenance, and Forest provides none of the drivers. Jan Rose is an independent contractor. Payment per unit delivered, the risk of nonpayment, the investment in equipment and the freedom to hire drivers all point to independence.

Reading across the six examples

Compare what separates the employees from the contractors. The employees were paid by the hour, by piecework or by a percentage under the company’s supervision; the company inspected their work and could control who helped; they had no responsibility for defects or for finishing; they did not offer services to the market. The contractors had flat or per-unit prices, their own insurance or business entity, the risk of repairs or nonpayment, and other customers. That contrast follows the publication’s three categories. Use the selector above to pull up any example and see the facts that decided it.

If you are unsure about a real worker, the publication says to file Form SS-8 and ask the IRS. See also worker misclassification for what follows if the classification is wrong.

Sources

• IRS Publication 15-A, Employer’s Supplemental Tax Guide (2026): section 2, Employee or Independent Contractor?: Industry Examples (Building and Construction; Trucking). Read November 2, 2026.

Edition read: Publication 15-A (2026), for use in 2026. Rates, wage bases and dollar limits on this page are the 2026 figures printed in that edition; check the current publication and the IRS employment tax pages for your tax year. This page summarizes the publication and does not replace it.