Independent Contractors: Fair Warning S. Lorrie Ray, Esq. MSEC

Transcription

1 Independent Contractors: Fair Warning S. Lorrie Ray, Esq. MSEC

2 Roadmap New governmental focus Common misconceptions Areas of law affected Various standards used Two main factors Creative efforts of businesses Tips and suggestions

3 Terminology and Common Misconceptions Do you use any of these: Contract Employees 1099 Employees Freelance Workers or Free Agents Independent Consultants Do They Meet the Independent Contractor Standards?

4 The New Reality Governments need revenue Greater scrutiny Stepped up enforcement New penalty laws See as misclassified employees

5 Areas of Employment Law Affected State and federal income taxes Unemployment and workers compensation Health insurance, ERISA, COBRA Fringe benefits, vacation, sick leave, holidays FLSA, FMLA EEOC, Title VII, ADA, ADEA, CADA

6 Various Sets of Standards Internal Revenue Service Fair Labor Standards Act Equal Employment Opportunity Commission State Department of Revenue Unemployment and Workers Compensation

7 Independent Contractors Two Main Factors Independent Business Direction and Control

8 Independent Business More than one client Investment in tools and equipment Chance of profit or loss Written agreement Benefits provided Length of relationship Integration with business

9 Independent Business Must Have Other Clients Carpet Exchange case Several clients at the same time

10 Independent Business Series of Short Term Contracts Okay Long View Systems Corp case Computer consultant One job at a time, one client at a time

11 Independent Business Merely Allowing Other Work not Enough Valdez case Not enough that contract permits other work

12 Independent Business Occasional and Sporadic Work for Others not Enough Speedy Messenger case Available for other delivery work Occasional delivery for friends

13 Control and Direction Set hours of work and length of workday Detailed instructions More than minimal training Evaluating performance Ending the agreement

14 Control and Direction Close Supervision of Work Actual Control Cakes by Karen Case Regular daily schedule Mandatory extra hours Needed permission for time off

15 Control and Direction Control in Fact Virginia Employment Commission case No control stipulated in written agreement Letter showed control of hours, amounts charged, care of equipment

16 Questions and Suggestions Typical questions How they are interpreted How to comply

17 Questions and Suggestions How is their rate of pay determined? Are they paid a salary, hourly rate, fixed rate, contract rate, or by the completion of work? How are the individuals paid? If by check, to whom is the check made payable?

18 Questions and Suggestions What training do you provide the individuals? What tools or benefits do you provide to the individuals? What materials and equipment do you provide to the individuals?

19 Questions and Suggestions Are the individuals businesses a part of your business? Are their businesses separate and distinct?

20 Written Agreements Written Agreements Highly Recommended Provide Rebuttable Presumption Warning Language Required: Emphasized text Must state: not entitled to UC and WC benefits Worker must pay state and federal income taxes Notarized Signatures (WC)

21 MSEC FYI on Independent Contractors Summarizes legal principles - based upon IRS factors Includes proposed independent contractor agreement Available on MSEC web site Start on MSEC main web page: Go to: Member Home, then search for the term Independent Contractors

22 Looking at Trouble? If you think you have it all wrong, and need to make changes, you can check out an IRS article on the Voluntary Classification Settlement Program Link: ,00.html