Alaska Statutes require a close scrutiny of the relationship between the employer and the contract laborer to determine if the worker is an employee for unemployment insurance purposes. As an employer, it is in your best interest to understand the provisions. Failure to report a contract laborer who does not meet all the conditions stated may result in additional taxes, interest, and penalties to the employer. A number of appeals and court decisions have interpreted these conditions and may aid you in determining if contract labor is really employment and should be reported. The following synopsis is not all-inclusive and for the sake of brevity, references to specific appeal decisions have been eliminated.
Control is exercised when workers are totally dependent upon the employer economically.
The employer exercises the necessary control of the employee through monetary means. For example, a worker who performs services primarily for one company would be economically dependent upon that company. If the employer and not the worker bears responsibility for the finished product or legal responsibility for the performance of the service, the worker who made the product or performed the service is an employee for Employment Security Tax purposes. In contract labor, the entity who contracted to have the work done is concerned only with the finished product. In an employer-employee relationship, concern is with the way the work is done.