Short answer: It is not your choice, and it is not theirs either. The classification is determined by the nature of the working relationship — primarily how much control you have over how the work gets done — and both the IRS and Washington State apply their own tests to it.
The core question is control. An employee is told what to do and, importantly, how and when to do it. They typically work your hours, use your tools and materials, follow your process, and are not free to do the same work for your competitor down the street this afternoon. An independent contractor is hired for an outcome, brings their own tools and methods, sets their own schedule within the deadline, and genuinely runs a business of their own — with their own clients, their own insurance, and their own license where one is required.
Some signals matter more than they look. Someone who has worked for you full-time, on your schedule, for two years is very hard to defend as a contractor no matter what the agreement says. A signed contract calling someone an independent contractor carries almost no weight on its own; agencies look at what actually happened, not what the paperwork claims.
Washington adds its own layer. Labor & Industries and Employment Security each apply their own multi-part tests, and it is entirely possible to be treated as a contractor for one purpose and an employee for another. Construction has additional statutory requirements that are stricter than the general rules.
The cost of getting it wrong runs one direction. If a worker you have been paying on a 1099 is reclassified as an employee, you can be assessed the back payroll taxes, the unpaid workers’ comp premiums, interest, and penalties — and the worker may have claims of their own. There is no equivalent penalty for treating a true contractor as an employee, which tells you which way to lean when a situation is genuinely unclear.
If you have someone whose status you are not certain about, that is worth twenty minutes of conversation now rather than a finding later.
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