Arkansas Contractor License Exam — All Questions

An employee is injured while framing a house during work hours. Which system is designed to cover the employee's medical bills and lost wages regardless of who was at fault?

• a.The employee's personal auto insurance
• b.Workers' compensation insurance✓
• c.A performance bond
• d.The building permit fee

Workers' compensation is a no-fault system: an employee injured on the job receives medical care and partial wage replacement without having to prove the employer was negligent, and in exchange the employer is generally protected from most injury lawsuits. Carrying required workers' compensation coverage is a fundamental legal obligation for contractors with employees. A bond and a permit serve entirely different purposes.

Under the federal Fair Labor Standards Act (FLSA), a covered nonexempt employee must generally be paid overtime for hours worked beyond:

• a.8 hours in a single day, in every state
• b.35 hours in a week
• c.40 hours in a workweek, at one-and-one-half times the regular rate✓
• d.60 hours in a week, at the regular rate

The FLSA sets the federal overtime rule: covered nonexempt employees must receive at least 1.5 times their regular rate for hours worked over 40 in a workweek. The federal standard is weekly, not daily (some states add their own daily-overtime rules, but the nationwide FLSA baseline is the 40-hour workweek). Misclassifying workers to dodge overtime is a common and costly violation.

Which factor most strongly suggests a worker should be classified as an EMPLOYEE rather than an independent contractor?

• a.The business controls how, when, and where the work is done and provides the tools✓
• b.The worker runs an independent business serving many clients and sets their own methods
• c.The worker supplies their own tools and can profit or lose based on their own decisions
• d.The worker is free to accept or reject jobs from many different companies

The central test for classification is the degree of control and independence. When the business directs how, when, and where the work is performed and supplies the tools, the worker looks like an employee. Independent contractors typically control their own methods, invest in their own tools, serve multiple clients, and bear the risk of profit or loss. Misclassifying employees as contractors to avoid taxes, overtime, and workers' comp is a serious and heavily penalized violation.

What is the purpose of Form I-9 that a contractor completes for each new hire?

• a.To calculate the employee's overtime rate
• b.To register the employee with the local building department
• c.To order the employee's personal protective equipment
• d.To verify the employee's identity and legal authorization to work in the United States✓

The federal Form I-9 is used to verify each new employee's identity and their authorization to work in the United States, as required by immigration law. Employers must complete and retain an I-9 for every employee and review acceptable documents. It is separate from tax forms (like the W-4) and from any safety, permitting, or payroll-rate functions.

At the end of the year, an employee receives a W-2 while an independent contractor who was paid $600 or more receives a:

• a.Form I-9
• b.Form 1099 (such as 1099-NEC)✓
• c.Form W-4
• d.A certificate of occupancy

Employees receive a W-2 reporting wages and the taxes withheld from their pay. Independent contractors are not employees, so no taxes are withheld; instead a business that pays a contractor $600 or more in a year generally issues a Form 1099-NEC reporting that nonemployee compensation. Using the correct form follows directly from correctly classifying the worker, and the IRS uses these forms to track income.

On federally funded public works projects, the Davis-Bacon Act generally requires contractors to:

• a.Pay workers at least the locally prevailing wage and fringe benefits for their trade✓
• b.Hire only workers from out of state
• c.Provide free housing to all employees
• d.Complete the project without any inspections

The federal Davis-Bacon Act requires that laborers and mechanics on federally funded or assisted construction contracts (above a threshold amount) be paid no less than the locally prevailing wages and fringe benefits, as determined by the Department of Labor for the area and trade. Many states have similar 'little Davis-Bacon' prevailing-wage laws for state-funded projects. Certified payroll records document compliance.

How is the cost of a contractor's workers' compensation insurance primarily determined?

• a.By the color of the company's trucks
• b.By the number of building permits pulled
• c.By the company's payroll and the risk classification of the work performed✓
• d.By the age of the company's owner

Workers' compensation premiums are generally calculated from the employer's payroll multiplied by a rate tied to the risk classification of the work — higher-risk trades like roofing carry higher rates than lower-risk office work. An experience modification factor then adjusts the premium up or down based on the company's actual claims history. Keeping a good safety record therefore directly lowers insurance costs.

Under the federal Fair Labor Standards Act, what is generally true about the overtime standard?

• a.Overtime is owed after 8 hours in any single day nationwide
• b.Overtime must always be paid at double the regular rate
• c.Overtime applies only to salaried managers
• d.Overtime is owed for hours over 40 in a workweek, at 1.5 times the regular rate, for covered nonexempt employees✓

The FLSA's federal overtime rule requires covered nonexempt employees to be paid at least one-and-one-half times their regular rate for hours worked beyond 40 in a workweek. The federal standard is measured weekly, not daily, and the premium is time-and-a-half (not double time). Some states impose additional daily-overtime rules, but the nationwide FLSA baseline is the 40-hour workweek at 1.5x.

Federal anti-discrimination laws such as Title VII prohibit an employer from making hiring and firing decisions based on:

• a.Protected characteristics like race, color, religion, sex, or national origin✓
• b.A worker's actual job performance
• c.Whether the worker holds the required trade skills
• d.Whether the worker shows up to work on time

Title VII of the Civil Rights Act prohibits employment discrimination based on protected characteristics — race, color, religion, sex, and national origin — and other federal laws add age (ADEA) and disability (ADA) as protected classes. Employers may absolutely make decisions based on legitimate factors like skill, performance, and attendance; what they may not do is base employment decisions on these protected characteristics.

What is the purpose of the Form W-4 that a new employee completes?

• a.To verify the worker's legal authorization to work in the U.S.
• b.To tell the employer how much federal income tax to withhold from the employee's pay✓
• c.To register the employee with OSHA
• d.To calculate the company's workers' compensation premium

The Form W-4 (Employee's Withholding Certificate) is completed by the employee so the employer knows how much federal income tax to withhold from each paycheck based on the employee's filing status and adjustments. It is distinct from the Form I-9, which verifies identity and work authorization. Both are completed at hire, but they serve different functions — tax withholding versus employment eligibility.