Compliance and the Law

Oregon’s Independent Contractor Laws

A worker providing services for pay is generally considered an employee by Oregon regulatory agencies - unless that worker meets the requirements for an independent contractor. 
Oregon Revised Statute (ORS) 670.600 (summarized below) defines the term “independent contractor” for the following state agencies:
•    Department of Revenue
•    Employment Department
•    Construction Contractors Board
•    Landscape Contractors Boards
Be aware, however, that different criteria are utilized by the Bureau of Labor and Industries and the Department of Consumer and Business Services' Workers Compensation Division.
A summary of the criteria used by each of these state agencies is available in chart form.
ORS 670.600: 
Under this law, workers may be properly classified as independent contractors provided they
1.    Are free from direction and control, beyond the right of the service recipient to specify the desired result, AND
2.    Are licensed under ORS 671 or 701 (State Landscape Architect Board or Landscape Contractors Board and State Board of Architect Examiners  or Construction Contractors Board) if licensure is required for the service, AND
3.    Are responsible for other licenses or certificates necessary to provide the service AND
4.    Are customarily engaged in an “independently established business.”
To qualify under the law, an “independently established business” must meet 3 out of the following 5 criteria):

1. Maintain a business location that is:

    a. Separate from the business or work location of the service recipient; or

    b. that is in a portion of their own residence that is used primarily for business.

2.    Bear the risk of loss, shown by factors such as:

    a.    Entering into fixed price contracts;

    b.    Being required to correct defective work;

    c.    Warranting the services provided; or

    d.    Negotiating indemnification agreements or purchasing liability insurance, performance bonds, or errors and omissions insurance.

3.    Provide contracted services for two or more different persons within a 12-month period, or routinely engage in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.

4.    Make a significant investment in the business through means such as:

    a.    Purchasing tools or equipment necessary to provide the services;

    b.    Paying for the premises or facilities where the services are provided; or

    c.    Paying for licenses, certificates or specialized training required to provide the services.

5.    Have the authority to hire and fire other persons to provide assistance in performing the services.

Additional provisions:
1.    A person who files tax returns with a Schedule F and also performs agricultural services reportable on a Schedule C is not required to meet the independently established business requirements
2.    Establishing a business entity such as a corporation or limited liability company, does not, by itself, establish that the individual providing services will be considered an independent contractor.
Feel free to consult the full text of ORS 670.600 and its implementing regulations (OAR 471-031-0181).
ORS 670.600 applies only to the Oregon Department of Revenue, Employment Department, Construction Contractors Board, and Landscape Contractors Board. These agencies require that the person performing the work meet all the criteria of that law to be considered an independent contractor.
For information about this topic under workers' compensation and Oregon labor laws, please contact the Workers' Compensation Division and Bureau of Labor and Industries. These agencies, along with the IRS, use a different method for determining whether a worker is subject to employment laws. A summary of the tests used by BOLI and Workers’ Compensation can be found on this chart.

Exception to Employment:
There are many exceptions to what is considered “employment” in the law when it comes to Unemployment Insurance. Details of these statutory exceptions can be found in ORS 657.030, 657.040, and 657.043 through 094. Please note that if you are unsure whether someone performing a service is subject to employment law, contact us with your questions.