Are directors employees of the company?

Question

Directors tell the company what to do but most directors also get paid for their services. Does that make directors employees of the company?

Answer 1

In the U.S. a board member would not be an employee just by virtue of being a board member, even if they were compensated for attending board meetings. The CEO, an employee, might or might not also be a board member. Employees can be fired by their manager. A board member can't be fired from the board but, typically, only removed by a vote of shareholders. They are not assigned tasks by managers of the company.

This is 100% clear in CA under employment code 622

(a) “Employee” does not include a director of a corporation or association performing services in his or her capacity as a director.

I was a CEO of a private company I co-founded I was a board member as a result of voting myself on the board via my stock ownership. The majority of the board could fire me as CEO but I would still be a board member.

If outside board members did get compensation, it would be as a consultant, paid with a 1099.

The CA code does say that a board member could take on actual work, like auditing financial information, that might fall under the activities of an employee.

Answer 2

Maybe

australia

The role of a company director is to govern a company on behalf of the shareholders or members of that company.

General duties of directors

That role can be fulfilled in three ways:

1. Volunteer without payment as is the case with many non-profit or charitable corporations,
2. Contractor for payment under a contract for service,
3. Employee for payment under a contract of service.

Only if the relationship between the company and the director is an employment relationship is the director an employee.

Whether a person is an employee or a contractor is a question of fact and generally what the company and the director think the relationship is, has very little bearing:

• Indepdendent/Contractor vs Regular Employee
• Independent contractor, feeling like an employee - Will California's AB5 change my classification?
• What would go into proving you are an employee and not a contractor?

Being a director doesn’t automatically make one an employee but depending on the totally of the relationship, they might be.