Fundamental Payroll Certification (FPC) Practice Exam

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What factor is considered in determining if a worker is classified as an Independent Contractor under the Reasonable Basis Test?

  1. Permanent employment status.

  2. Longstanding industry standards.

  3. Daily oversight by the employer.

  4. Payment method of wages.

The correct answer is: Longstanding industry standards.

In the context of determining whether a worker is classified as an Independent Contractor under the Reasonable Basis Test, longstanding industry standards play a crucial role. This test evaluates the level of control and independence a worker has in their job, and it considers the practices that are commonly accepted within the industry. By examining how similar workers are classified across the industry, it can provide a basis for whether the worker in question is appropriately classified as an Independent Contractor. The presence of longstanding industry standards indicates that a worker has the autonomy expected of an independent contractor, helping to establish a reasonable basis for that classification. It emphasizes the importance of industry norms and practices in making classification decisions, which can also have implications for taxation and benefits. The other choices do not directly align with the criteria used in the Reasonable Basis Test for independent contractor classification. Permanent employment status and daily oversight by the employer suggest a higher level of control, which is typically associated with an employee classification instead. The payment method of wages can vary widely and does not provide a reliable metric for classifying a worker as an independent contractor. Hence, the focus on longstanding industry standards is key to this determination.