Final answer:
The key factor distinguishing an independent contractor from an employee is the degree of control an employer has over the individual's work, including work processes and schedules, which is significantly less for contractors. Additionally, contractors typically do not receive employer benefits unlike employees.
Step-by-step explanation:
The most distinguishing factor that differentiates an independent contractor from an employee is the degree of control that an employer has over the work being performed. While an independent contractor agreement specifies terms of work, compensation, and deadlines, it does not encompass the same level of control over how work is done compared to an employee relationship.
An independent contractor typically has the freedom to set their own work hours, decide on the method to complete the work, and may work for multiple clients. They do not usually receive traditional employer benefits such as health insurance, retirement contributions, or paid time off. Conversely, an employee typically works according to an employer's schedule, follows specific procedures set by the employer, and benefits from the employer's benefits package.
Therefore, the level of control over work processes and employer benefits distinguishes an independent contractor from an employee. While both independent contractors and employees may have an employment contract, the actual content of this contract and the nature of the relationship it stipulates are critical in defining their work status.