6320 Contract Labor

Income earned from an employer which forces the worker to absorb significant expenses in order to remain employed is treated as self-employment income. These positions generally require the employee to enter into a contractual relationship with the employer.

Examples of this type of employment would include a truck driver who is required to purchase or lease his own truck, a rural mail carrier who must provide his or her own vehicle or pay all travel expenses. The presence of additional expenses must be verified and documented. Such expenses must be directly related to the person’s employment and required to maintain employment. Expenses cannot be reimbursed. Earnings dependent only upon typical deductions from income (such as state and federal taxes, OASDI, Medicare, and other mandatory or optional deductions) do not meet this criteria. In addition, persons required to incur only nominal expenses, such as mechanics required to purchase their own tools or regular postal employees required to purchase uniforms do not meet this criteria. These situations are to be evaluated on a case-by-case basis. The presence of a contract requiring the employee to provide equipment or cover costs necessary for employment is the primary indicator of income classified as contract labor.