What characteristic distinguishes an employer-employee relationship from that of a principal-independent contractor?

The level of control exerted by the employer is a fundamental characteristic that distinguishes an employer-employee relationship from that of a principal-independent contractor. In an employer-employee relationship, the employer exercises significant control over how, when, and where the work is performed. This includes dictating the methods and processes that the employee must follow to complete their tasks, which is a key characteristic of employment.

In contrast, independent contractors typically retain a higher degree of autonomy over their work. They decide how to carry out the tasks they are contracted to perform and are responsible for the manner in which they achieve the results. This distinction in control is crucial, as it affects various aspects of employment law and tax requirements, as well as the rights and responsibilities between the parties involved.

While the other attributes mentioned, such as the ability to work at their discretion, entitlement to benefits, and the formality of the work agreement, may play a role in differentiating these relationships, they do not capture the essence of the relationship's dynamics as clearly as the level of control does. Therefore, the degree of control exerted by the employer stands out as the most critical factor in distinguishing an employer-employee relationship from that of a principal and an independent contractor.