What Is a Statutory Employee?

A statutory employee is an individual who is classified as an independent contractor for tax purposes, but does not fall into the traditional definition of an independent contractor. Statutory employees are sometimes referred to as “statutory workers,” “special employees,” or “contractual workers.”

Under the Internal Revenue Code, an employee must meet the following criteria in order to be considered a statutory employee:

• Substantially all of the work must be done personally by the employee.
• The employee doesn’t have a substantial investment in the tools and property used to carry out their work (other than an investment in transportation facilities).
• The employee’s work is performed on a continuing basis for the same employer.

For example, if a college student is hired to tutor other students on campus, they would typically be classified as an independent contractor. However, if the college’s tutoring system requires that the student be supervised and controlled by the college, then the student could be classified as a statutory employee.

Another example would be if an individual is hired to perform construction work on behalf of a company. If the company dictates the type of work being performed and how it is executed, then the individual may be classified as a statutory employee.

It is important for college students to understand the concept of a statutory employee, as employers may classify individuals as statutory employees in order to avoid paying additional taxes and benefits that would normally be associated with a traditional employer-employee relationship.