Whether a worker is an “employee” or an “independent contractor” is critical to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In some situations, federal law will govern, but the question is often resolved by looking to state law, particularly in areas such as unemployment tax liability, workers' compensation, and state wage and hour requirements. Under Montana law there is a conclusive presumption that a holder of a current, valid independent contractor exemption certificate (ICEC) issued by the Department of Labor and Industry is an independent contractor if the person is working under the independent contractor exemption certificate. The holder of an ICEC waives the rights, benefits, and obligations of the state's workers' compensation law unless he or she has elected to be bound personally and individually by the provisions of a specified workers' compensation plan.
Independent contractors have greater control over the way in which they carry out their work than employees, and businesses assume fewer duties with respect to independent contractors than employees. Independent contractor status provides the hiring party and the worker with an alternative relationship that gives each more freedom and flexibility than the employer-employee relationship.