Directors tell the company what to do but most directors also get paid for their services. Does that make directors employees of the company?
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.
The role of a company director is to govern a company on behalf of the shareholders or members of that company.
That role can be fulfilled in three ways:
- Volunteer without payment as is the case with many non-profit or charitable corporations,
- Contractor for payment under a contract for service,
- 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.