EMPLOYEE OR INDEPENDENT CONTRACTOR. Disclaimer. 17 TH Annual Snow & Ice Symposium Columbus, OH. Snow & Ice Management Association Copyright 2014

Transcription

1 EMPLOYEE OR INDEPENDENT CONTRACTOR Patrick McGuiness Disclaimer The Real Disclaimer: This presentation contains information about employment law matters for informational purposes only. It is NOT legal advice. Contact a qualified attorney for specific advice on any legal matter. Independent Contractor = Subcontractor Terms mean the same thing for the purposes of this presentation Have a different meaning when it comes to contract language 1

2 Why it Matters - Pay Overtime & Minimum Wage Not owed to Independent Contractors IS owed to employees Why it Matters - Benefits Owed to employees Why it Matters - Taxes Not only withholding of taxes Contributions to medicare, etc. 2

3 Why it Matters - Social Security Employers contribution on behalf of the employee Independent contractors won t have automatic SS contributions, which can be detrimental later in life Why it Matters - Unemployment Independent contractors can t claim unemployment If a worker thinks they are an employee or that they can collect unemployment, it can start the investigation process Why it Matters Workers Compensation Independent contractors are not covered by workers comp. If they are injured, they will need their own insurance coverage. Guess what happens with severe injuries without coverage? The business gets sued. 3

4 Excuses, Excuses It is too expensive I can t be competitive Everyone else is doing it I have done it this way for years I haven t had any problems yet Common Mistakes Just calling someone an IC/ subcontractor and paying them as one Simply telling someone that they are an IC/subcontractor does not make it true Common Mistakes 1099 and a Subcontractor Agreement Having written agreements is a good thing, but it doesn t meet all the tests for worker classification. 4

5 Common Mistakes Temporary Workers Freelancers Use temp workers or put workers on the payroll as employees Consequences Everything you were trying to avoid Back wages and overtime Back taxes Liability for injuries Back social security Consequences Additional Fines Penalties Criminal Liability 5

6 Figuring it all out The Fair Labor Standards Act (FLSA) Applies to almost all businesses $500,000 threshold Interstate commerce test FLSA Test 1) The extent to which the work performed is an integral part of the employer s business. FLSA Test 2) Whether the worker s managerial skills affect his or her opportunity for profit and loss. 6

7 FLSA Test 3) The relative investments in facilities and equipment by the worker and the employer. FLSA Test 4) The worker s skill and initiative. FLSA Test 5) The permanency of the worker s relationship with the employer. 7

8 Final FLSA Test 6) The nature and degree of control by the employer. IRS 11 Main Test Replaces the 20 Factor Test Asks Questions that fall into 3 categories: Behavioral Control Behavioral Control Questions Behavioral Control: If the organization has the right to control how work is done the person doing that work is an employee. Independent contractors must commit to what is produced, but hold onto the right to decide how to do it. 1. Instructions that the business gives to the worker. 8

9 Behavioral Control Questions 2. Training that the business gives to the worker. Financial Control Questions Financial Control: Assesses the extent and nature of the business aspects of the worker via five questions. These are looking at facts about the degree of financial control. 3. The extent to which the worker has unreimbursed business expenses. Financial Control Questions 4. The extent of the worker's investment. 9

10 Financial Control Questions 5. The extent to which the worker makes services available to the relevant market. Financial Control Questions 6. How the business pays the worker. Financial Control Questions 7. The extent to which the worker can realize a profit or loss. 10

11 Type of Relationship Type of relationship: Four questions are posed to discern the facts regarding the nature of the working relationship. 8. Written contracts describing the relationship the parties intended to create. Type of Relationship 9. Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Type of Relationship 10. The permanency of the relationship. 11

12 Type of Relationship 11. The extent to which services performed by the worker are a key aspect of the regular business of the company. Figuring it all out Complex and confusing questions No single question determines status Seek help if unsure Concluding Thoughts 12

13 QUESTIONS? Patrick McGuiness 13