Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
In that process, you'll alert the IRS that the employer has been defrauding that agency of the monies due, and likewise ... CA income tax, WC, and UI agencies. All of them will come down on this employer like a ton of bricks.
The employer in no way defrauded the IRS.. The employee, admits they were an independent contractor and not an employee, and thereby liable to pay THEIR OWN taxes.. not the employer..
pghquest:
I appreciate hearing from the other side on this. It's useful in plumbing for arguments that might be brought up against our case. Thank you for responding. I apologize that you had to delete some posts, I would've liked to hear them.
One thing to keep in mind is that the claim of copied materials is false and there is documentation to prove it. However, just because a claim is demonstrably false, doesn't mean that you can't find a crooked lawyer to write a threat letter and even litigate for you, if you feel like wasting money.
Anyway, I'm going to write a rebuttal of your arguments based on the facts. I know this isn't a fair argument because I am familiar with the case and you are not. So let me say one more time that I appreciate you taking the difficult opposite position.
You should brush up on the California Legal Code regarding your rights as an independant contractor.
Quote:
b. Independent Contractors. If you do not have a written agreement with an independent contractor, the work developed will be owned by that contractor–and you will have only a non-exclusive license to use it. In addition, you need to make sure that your “work for hire” agreements with independent contractors (such as programmers and Web designers) also include an assignment of ownership rights in the resulting product to your company. “Work for hire” clauses alone may not be sufficient."
Without a written agreement, California Law regards her designs are her property and her employer has only a non-exclusive liscense to use them.
In the end, the point is moot, though, because the designs were created independantly and they only superficially resemble each other. There's other documented evidence that shows indisputable proof that the designs are independant and not copies of each other..
The point here is that the employer tried to illegally switch an employee from "employee" status to "independant contractor" status to avoid paying taxes and benefits. Then, when she starts her own business--believing that she is an independant contractor--they try to switch back and claim that she has an employee's responsibilities to not compete with them.
Quote:
- Was verbally told she was an independant contractor (I am aquiring a sworn affadavit from a former office manager of the business in question) and taken off the payroll after 6 months. <---- Not the same as above.. Employees are not independant contracts.. She was hired on a contract basis, not as an employee. Sworn affadavits will do nothing but help the company in question.. More you get, the easier it will be to lose. You are now ADMITTING she was told she was an independant contractor.. not an employee..
It is far better for our case if she were an independant contractor, as the company would have no claim to possible non-competition under common-law clauses. I can't find the part of the California code that explicitly states an employee can't compete with their employer on their own time, however, and that's the whole reason I started this topic.
Quote:
- Was paid by irregular paycheck (full hourly rate, sometimes NSF) with no evidence of witholdings or SS contributions. <----- independent contractors do not have taxes or SS contributions taken out. Its your wifes job to pay these quarterly.
That's why I'm getting professional help to straighten the tax mess out and pay what is owed as soon as possible. Also, it will help with advice on future contracted work. I wouldn't be surprised if there are some penalties involved. Ignorance of the law is no excuse, and it's long past time to stop trusting an unreliable business to adhere to the tax laws, and to personally make sure that the person in question complies with their tax responsibilities.
Quote:
- Started her own company in good faith, believing she was an independant contractor because of the company's deception. <----- its never in good faith to start a competitor to the company that pays you without their WRITTEN consent.
Since when does a contractor need to ask their customers if they can start their own business? You must live in a state with some pretty draconian labor regulations.
Quote:
- Was "fired" for starting her own company. They are still witholding some of her personal property. They initially refused to pay for the last month of work she had done for them. <--------I'd fire her also, and I'd surely think about holding back payment. Let me get this straight, your wife worked for a company, and then started her own, and the company that employed your wife is supposed to know when she's on/off the clock and that they arent paying her, to essentially move their clients to your "wifes" company?
The products are marketed through different marketing agencies. There's no direct client contact, nor any unfair competition. If the employer wants to claim she's a contractor, then they only need pay for the work she's delivered to them. If the want to claim her as an employee, they need to withold/pay the proper taxes and benefits. They can't have it both ways.
Quote:
- Recieved an email from the current office manager stating that they were refusing to pay her travel expenses because she was "employed under 1099 conditions". <--- see following note right below.
- Recieved a threat letter from the company's attourney demanding that she turn over all assets relating to her independant company, claiming she copied proprietary designs (that she produced for them), and reserving the right to sue for punitive damages. <---- company 100% correct here..and this forum, if the lawyer for her company can actually possibly be use it as evidence against you.. Let me quote the damaging part.. "SHE PRODUCED FOR THEM".. That makes it THEIRS.. She was paid for them, they arent hers to use for ANYTHING.
Again, the designs are different with documented evidence to show that they were developed independantly from each other. So, they can claim all they want, even if she was a common law "employee", the claims are demonstrably false and in fact constitute defamation if they are published through any means. Of course, you wouldn't know this based on the initial postings, so I apologize for leading you into that particular low-hanging branch.
In any case, see my first statement above. By claiming she's a 1099 contract worker, they forefit exclusive rights to her inventions without a written agreement.
Quote:
The employer is trying to get what they paid for. They dont need to pay for travel, unless it was in writing, taxes, your responsibility as an independent contractor, Vacation time doesnt apply to people who dont actually "work" for their company, and surely you dont get benefits. They have full rights to sue, if your violating their companies ability to do business, using THEIR own information, and the "proprietary designs" that THEY PAID FOR.
The employer got everything they paid for. The work was delivered to them in a timely manner free from defects or errors. You are correct, that if their information had been used to compete with them, they would have the right to sue. However, there is overwhelming evidence that none of their property has been used in competition against them.
Quote:
Paycheck ONE should have told you something was admiss when you didnt have taxes withdrawn. As a contracted employee WHICH YOU ADMITTED ABOVE that she was, they have no liability what so ever, to pay YOUR taxes..
Happily, there is time to amend our applicable tax returns. As I understand it, they were obligated to provide her with a 1099 tax form and other witholding information, but failed to do so. There remains the question whether they committed fraud against both tax agencies and their employee by claiming the employee was a contractor, when the nature of the work would point to her being a common-law employee. Either way, the employee was convinced by the company that she was a contractor and operated in good faith under that assumption.
Quote:
Simply stop using stuff that the EMPLOYER paid for.. Its not yours or your wifes.. Send it all back to the LAWYER, with NO letter other then.. Here is the requested information..
The stuff the employer paid for was never taken or used outside of that employer. Simple enough.
Quote:
None of this would result in a deportation, this is a civil court and they do not deport people for civil courts, just criminal.
Good. I fully hope that the employer stays within the country to face the music.
Quote:
Furthermore, no chance in hell you'd win a judgment against the company because your using STOLEN Properietary information that you were PAID for.
1. There was no theft. No proprietary information was ever used outside the employer. I included it because it is claimed, but there is indisputable evidence that none of the work done for the company was ever used outside of the company.
2. The information is not proprietary under California law without a written agreement. Even then, the legality of such an agreement would be questionable.
3. The employee has no plans or urge to litigate anything in this matter, despite demonstrable wrongdoing by the employer. Besides the employer's bounced checks, petty theft of personal property by the employer, defamation by the employer, and possible witholding of benefits--depending on the worker's actual classification, no major harm was done to the employee and that litany of complaints is hardly worth the expense of retaining an attorney.
Quote:
I'll be waiting to hear about the judgment they win against your wife..
I won't be sorry to disappoint you.
Quote:
You seem to want it both ways, you want to be classified as an employee, so they can take out taxes, pay the expenses, and then you want to be classified as an independent contractor so she can start an "indpendent" competative company. Even your own statements are to the fact that she was told, up front, (now sworn testimony) that she wasn an independent contractor. You want them to PAY her for the "proprietary" items, including travel etc that it costs to produce them, and then you want to get the rights to use them afterwards.. You've been paid for them.. THEY ARENT YOURS!!
No, I want the employer to adhere to the law. Her employer decided they didn't want to pay benefits and taxes anymore, so they reclassified her as an independant contractor. She believed she was an independant contractor and therefore allowed to start whatever business venture she saw fit in order to make up for the lack of benefits. When the employer noticed her business, they got greedy and tried to reclassify her as an employee in order to lay claim to her business. They also did their best to drum up false claims against her, such as theft of company property, to support their case. Their claims are demonstrably false and their actions are illegal. I want this mess straightened out and the truth brought forward.
Some valid points you brought up, but what exactly was your wife hired to do? Was she hired to build that "properitary" item your speaking of because I'm confused. You state that she is using THEIR properietary item.. was that her job, was she actually hired and paid to build that "properietary" item?
That being said, I'm a consultant for a football league, no a chance in the world I can go start my own football league, collect payment from them, so I can start my own, using the knowledge I have gained working with them..
Lol. I guess you can't create your own football league on your own time. I'm sorry to be so general, but I'm sure you understand why I am. Consider that the product is something that an individual could make by their own skill and manufacture in coordination with manufacturer to mass-produce it (Like a greeting card, for example).
My wife was hired to essentially create the product from start to finish. She created products for the primary employer, she also created products for her own business on her own time. She made sure that each product was--at the minimum--different within the bounds of the common practices and laws governing her particular industry.
The employer in question doesn't see it that way. They claim that the products are the same. Essentially, they're saying they paid her to make something, then she copied it and sold it through her own company. This is the statement that can be disproven. She created independant products with decisive and obvious differences. Regardless of the law about contractor's inventions, I would agree that she shouldn't (even if it were legal) knock-off one of her own products, that she sold to a client, and sell it on her own. Fortunately there's clear proof that's not what happened.
They're also claiming she is not allowed to practice her trade outside their company at all. This is the one that's more of a gray area because I can't find the specific laws governing this sort of competition. Most simply state that employee contracts forbidding competition are not legally binding. It doesn't help the employer's case that they claimed she was a contractor and not an employee.
Keep one thing in mind, first, while its nice to play with ideas, and we can only give our "opinions" on the matter, we are no lawyers, and without knowing ALL of the facts, you can not get a true response or opinion.
Furthermore, sometimes its better to just roll over. The last lawsuit I funded, Cost me $45,000 in legal fees, and while I eventually won, the company I sued went bankrupt over it. I then needed to sue owners of the companies etc, causing them to settle out of court, I'll never even get close to recouping my losses (nearly $200,000). For me it was personal, didnt care what it costs, I wanted to make sure that no one else was put into my situation.
And, $45,000 to me is A LOT of money, several years net profits.. so I'm not just rolling in dough with nothing else to do..
Need to ask yourself, are you willing, or even able to finance such a challenge, and even if you do, and win, nothing in the world "forces" the debtors to pay judgments. Look at OJ.. Only now are they beginning to collect, and its nickel and dimes compared to whats owed and what was spent.
pghquest ... you're incorrect re independent contractor situations and site manuals/workplace standards.
I work as an independent contractor on job sites for several major international companies. All have site specific and general corporate polices which I must adhere to very strictly to be allowed to enter the premises and perform my work to completion for my compensation. Should I violate any of their policies, I will be subject to being escorted off the premises, and subject to damages owed them if I cause them any downtime because of my not following their site procedures. The site manuals are referred to in my contract terms, and I am expected to be familiar with and conform to the terms as part of my Bid for the project. They address everything from confidentiality of what I see and hear on the site, to job work safety requirements, to just about every aspect of my presence on the worksite. Some require only US citizens to be on the jobsite. Some restrict the hours we may work, and address the techniques we are allowed to perform our work (which may be counter to the manufacturer's installation requirements for the products we're installing). The manual is the same manual that their employees must adhere to. (Companies such as tech hardware/software manufacturers, optical equipment plants, food manufacturing plants, power plants, chemical processors, pharmaceutical manufacturers, and many similar facilities). I've had everybody from site safety managers who don't know a thing about my materials and what I do to site engineers try to enforce their view of how to perform a job which I've bid to make money on, not to second guess their uniformed and incorrect views on the project.
I literally have walked off job sites at great personal expense when the rules and regs get interpreted in a manner which prohibits me from performing my work. That's when I get to visit with the higher ups and resolve the workplace requirements. Sometimes, there's quite a clash between what has been requested for a result and Bid and others in the same company reading the same manual. I've had time sensitive projects shut down with in-plant safety or fire drills which ruined the project. I've had site security people ignore their own posted warning signs about work in progress and destroy my work by entering an area with a vehicle or by walking through. Some of these companies won't entertain the concept of a change order when they create these problems for us.
The toughest aspect of conforming to these site manuals and bearing the expenses that they may create for my work performance is when I come in as a sub-contractor to a GC who agreed to such a manual, and only mentions it as a one-liner in their Bid documents ... something to the effect that the sub contractor will conform to all of the project owner's site requirements. It's a big unknown, and in some cases, a significant burden upon our work and overhead expense.
Additionally, it's the employer's sole responsibility to make timely tax deposits on the behalf of an employee. Not reporting wages paid, not filing tax deposits, and not paying them are the responsibility of the employer. It's also encumbent upon the employer to withold the employee's contribution from their gross pay, but the employer's contribution is above and beyond what the employee pays; ie, FICA is matched by the employer to the employee's share.
If you doubt this scenario, you might want to research who the IRS and the WC and the UI boards will come after first and foremost and hold accountable for the missing reports and the monies owed. It won't be the employee, but the employer. I know of too many businesses that didn't file reports and pay their obligations ... and have been locked up and auctioned off; those tax auctions are where I've acquired some of my equipment as my competitors were sold off to pay their obligations. I've also bought commercial real estate that was auctioned off to pay for obligations that weren't paid by the company.
I've also been the employer who got on the wrong side of the FED because I filed FICA returns with SS numbers that didn't appear to be correct. The Fed's didn't go after the employee ... they came after me for reporting wages paid and deductions made to a bad account number. In my work, there's a lot of turnover of employees, and sometimes, it's very difficult to track down a former employee and get them to redo or verify their W9. I've had the Fed's on my case for years after filing a monthly report with a bad number on it .... even when I had signed document from my employee and the best information available for their residence address to send their W-2's to.
My bet is that you've never been an employer and had to tangle with all of the taxing authorities that are one's silent business partner ....
Additionally, it's the employer's sole responsibility to make timely tax deposits on the behalf of an employee. Not reporting wages paid, not filing tax deposits, and not paying them are the responsibility of the employer. It's also encumbent upon the employer to withold the employee's contribution from their gross pay, but the employer's contribution is above and beyond what the employee pays; ie, FICA is matched by the employer to the employee's share.
According to the IRS own website, employers generally do not take taxes out of the checks of indepdendent contractors.
What, if any, quarterly forms must I file to report income as an independent contractor?
There are no quarterly income reporting requirements for Federal income tax purposes. However, because you generally will have no withholding taken from your income, you may need to make quarterly estimated tax payments. For information on how to make estimated tax payments refer to Form 1040-ES (PDF), Estimated Tax for Individuals. You need to be aware that there may be state and local requirements for estimated tax payments. You can start looking for information at How to Contact Us. You may want to go to your state's individual Web site for additional information. To access the state you need go to our Alphabetical State Index.
Furthermore, there is no requirement that an employer provide an independent contractor with an employee handbook or manual. Your lucky as an employee if you get one sometimes. Every company is different but its surely not unheard of that companies do not provide them to employees, even less common that they provide them to independent contractors as they are not viewed as "employees" by most companies, or the IRS.
pgh ... you're great at parsing details without any real comprehension of what's actually going on.
When I tell you that I know for a fact that I'm held ... as an independent contractor ... to the site standard manual, it's not a supposition. It's a FACT, and the burden of compliance with all of it has been a very costly learning experience for my business with several major companies.
Again, I suspect that you have no actual working experience beyond your job sector in the real world of independent contractors or as an employer.
Because, if you did ... you'd know full well that the situation of the employment in this particular thread was a textbook definition of an employee. Working full time at a business's site, on regular scheduled 40 hour workweeks, using company equipment to perform their tasks, no formal contract, no independent business set-up with their own business insurance, no independent office with their own equipment (as witness that they used the employer's computers to do their work instead of their own, at their own place of business to create work product) ... fails just about every aspect of the "means test" to qualify the worker as an "independent contractor". There's simply nothing about their work during the 2 year term of their employment that begins to suggest an independent business relationship contracted to provide professional work product.
It does not matter if the employee considered themselves to be ... at any point in their work with this employer ... an "independent contractor". What matters to the tax authorities is whether or not the person passes all the points of the "means test" during the term they were gainfully employed. If they cannot qualify per the tax authorities as an independent contractor, then the person is considered to be and is qualified as an employee.
You can cite every rule and regulation about independent contractor tax codes and IRS compliance, but if the person isn't an independent contractor to begin with ... those codes do not apply. You're simply wasting everyone's time with your profound ignorance of the real world of who qualifies as "independent contractor" when it comes to compliance with taxation.
You might ask why this qualification point is so important? Because so many people attempt (as employees and employers) to defraud the tax authorities of what they consider their due for their agency. The agencies are set up to provide essential benefits and services for the protection of employees. The agencies are the ones that apply the "means test" to the worker situation, and the burden of proof that a worker is in fact an independent contractor falls upon the business and the worker to prove to the agency. Saying you are independent doesn't make you independent!
Consider Workman's Comp or Unemployment Insurance (two that I've cited all along in this thread) ... these agencies aggressively seek to provide services to all employees, and their funding comes from the taxes levied upon employers. If they determine that a worker's situation is, in fact, an employee/employer relationship (no matter what or how those involved call their relationship) ... then they are going to collect the taxes owed. They regard any attempt to circumvent that tax obligation as fraud on the part of the employer.
Similarly, there's tax contributions to be made by an employer to the IRS, in the form of FICA payments. Not reporting the employee's earnings and paying the employer's portion of those payments is considered fraud by the employer. Again, the means test is applied by the IRS to determine the actual working relationship. And again, it doesn't matter what the people involved want to call their situation ... what matters to the IRS is strictly if the means test is complied with to establish the nature of the working relationship. And again, this OP's situation clearly falls within the realm of an employee/employer relationship, not as an independent contractor.
The burden of tax compliance here has always been upon the employer. Period. End of story.
It looks like there may be some confusion back in this thread over how Employee v. Independent Contractor status is determined. Here is the IRS form, that you can get a ruling in advance:
Even if you do not use this form in advance, it is very helpful in understanding what the "right" answers are to get which status, so that a business and employer/independent contractor can act correctly.
If floks really, really want to keep things clean, it can help if a would-be IC were to set up a small corporation to perform the services under. Since a corporation cannot be an employee per se, it resolves the issue in advance, as well.
pgh ... you're great at parsing details without any real comprehension of what's actually going on.
When I tell you that I know for a fact that I'm held ... as an independent contractor ... to the site standard manual, it's not a supposition. It's a FACT, and the burden of compliance with all of it has been a very costly learning experience for my business with several major companies.
Again, I suspect that you have no actual working experience beyond your job sector in the real world of independent contractors or as an employer.
Because, if you did ... you'd know full well that the situation of the employment in this particular thread was a textbook definition of an employee. Working full time at a business's site, on regular scheduled 40 hour workweeks, using company equipment to perform their tasks, no formal contract, no independent business set-up with their own business insurance, no independent office with their own equipment (as witness that they used the employer's computers to do their work instead of their own, at their own place of business to create work product) ... fails just about every aspect of the "means test" to qualify the worker as an "independent contractor". There's simply nothing about their work during the 2 year term of their employment that begins to suggest an independent business relationship contracted to provide professional work product.
It does not matter if the employee considered themselves to be ... at any point in their work with this employer ... an "independent contractor". What matters to the tax authorities is whether or not the person passes all the points of the "means test" during the term they were gainfully employed. If they cannot qualify per the tax authorities as an independent contractor, then the person is considered to be and is qualified as an employee.
You can cite every rule and regulation about independent contractor tax codes and IRS compliance, but if the person isn't an independent contractor to begin with ... those codes do not apply. You're simply wasting everyone's time with your profound ignorance of the real world of who qualifies as "independent contractor" when it comes to compliance with taxation.
You might ask why this qualification point is so important? Because so many people attempt (as employees and employers) to defraud the tax authorities of what they consider their due for their agency. The agencies are set up to provide essential benefits and services for the protection of employees. The agencies are the ones that apply the "means test" to the worker situation, and the burden of proof that a worker is in fact an independent contractor falls upon the business and the worker to prove to the agency. Saying you are independent doesn't make you independent!
Consider Workman's Comp or Unemployment Insurance (two that I've cited all along in this thread) ... these agencies aggressively seek to provide services to all employees, and their funding comes from the taxes levied upon employers. If they determine that a worker's situation is, in fact, an employee/employer relationship (no matter what or how those involved call their relationship) ... then they are going to collect the taxes owed. They regard any attempt to circumvent that tax obligation as fraud on the part of the employer.
Similarly, there's tax contributions to be made by an employer to the IRS, in the form of FICA payments. Not reporting the employee's earnings and paying the employer's portion of those payments is considered fraud by the employer. Again, the means test is applied by the IRS to determine the actual working relationship. And again, it doesn't matter what the people involved want to call their situation ... what matters to the IRS is strictly if the means test is complied with to establish the nature of the working relationship. And again, this OP's situation clearly falls within the realm of an employee/employer relationship, not as an independent contractor.
The burden of tax compliance here has always been upon the employer. Period. End of story.
Your whole argument is flawed due to one very simple fact.. Never did the poster state that his wife worked 40 hour weeks, on site, used company equipment like their computes, etc, where did you get any of that? If she did, your right.. but no where did the poster state, or even imply that was the case. (in fact he implied just the opposite by stating they wouldnt pay for her plane tickets)
For the sake of argument, lets assume she was an employee, which means she was paid hourly for the creation of this "proprietary item", and thereby it belongs 100% to the employer.
You seem to keep thinking that I've never been an employee, part of your largest argument, but your wrong, I have posted several times that I'm a consultant for one company, and I run my own company, where I have 26 employees, and I hire not only consultants, but independent contractors and interns.
You cant have it both ways, either she was an independent contractor, and thereby entitled to pay her own taxes, and possibly entitled to a "copy" of this proprietary item, or she was an employee and not entitled to a copy of this "proprietary" item, meaning she stole "company" information and used it for her own gain and to compete against her employer.
Last edited by pghquest; 10-04-2007 at 07:45 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
