Covered employment means employment that is subject to the Employment Security Law and on which Unemployment Insurance taxes must be paid and reports filed when the wage liability criteria are met.  See Employer Liability Guidelines 

The term "covered employment" means an individual's entire employment activity, including service in interstate commerce, performed for wages or under any contract of hire, written or oral, expressed or implied.

Independent Contractor 

Independent contractors operate an independent business wherein they contract with other businesses and individuals to provide a service.

Payments to independent contractors are exempt from UI taxes if BOTH of the following conditions are shown: 

1. The worker is free from the right of direction and control, both in contract and in fact, in the performance of the worker's contract of service, and
   
2. The worker is engaged in an independently established trade, occupation, or business.  

To determine if the worker has been and will continue to be free from control or direction in the performance of his work (Part 1 above), the following factors shall be considered: 

1. Whether the employer has control over:
   
   
   1. the details of the work;
      
   2. the manner, method or mode of doing the work; and
      
   3. the means by which the work is accomplished;
      
2. The freedom from direction and control must exist in theory (under that contract of service) and in fact.
   
3. The employer must demonstrate that it lacked a right to control the worker. 
     

To determine if the worker is engaged in an independently established trade, occupation, profession, or business (Part 2 above), the following factors shall be considered: 

1. Skills, qualifications, and training required for the job;
   
2. Method of payment, benefits, and tax withholding;
   
3. Right to negotiate agreements with other workers;
   
4. Right to choose business techniques;
   
5. Right to determine hours worked;
   
6. Existence of own outside business or occupation;
   
7. Special licensing or regulatory requirements for performance of work;
   
8. Whether the work is part of the employer's general business;
   
9. The nature and extent of the work;
   
10. The term and duration of the relationship;
    
11. Work premises;
    
12. Whether the worker has the authority to hire subordinates;
    
13. Whether the worker owns or leases major items of equipment or incurs substantial unreimbursed expenses. 
    
14. Whether either party would be liable to the other party upon peremptory or unilateral termnation of the business relationship.
    
15. Other factors which, viewed fairly in light of all the circumstances in a given case, may indicate the existence or lack of an independently established trade occupation, profession or business.

NOTE: The fact that the individual is paid on a commission, share of the profits, fee, job or piecework basis does not mean that a worker is an independent agent. The method of payment is not controlling.

Any individual engaged to perform or assist in performing the work of any person in the service of an employer is considered an employee of that employer, whether the individual was engaged or paid directly by the employer, so long as the employer had actual or constructive knowledge of the work.

The employer must maintain records so that wages and hours of exempt employment are shown separately from covered employment for each worker. The employer must report and pay tax on all wages including exempt wages IF records are not kept to distinguish that which is exempt from that which is covered employment.

To obtain more information about unemployment insurance taxes, contact any Department of Labor tax representative. To find the tax representative nearest you, please consult the Tax Representatives directory.