Companies misclassifying workers as independent contractors (attorney, taxes, law)

[GoCUBS1]

Originally Posted by Drover

My understanding of the construction industry is that it's common for construction contractors (especially "mom-and-pop" contractors) to hire their employees as independent contractors rather than as employees due to the highly variable workload that is intrinsic to being a construction contractor; in other words this hiring practice is common and accepted in the industry.

That is exactly right....

[Attrill]

Originally Posted by Drover

My understanding of the construction industry is that it's common for construction contractors (especially "mom-and-pop" contractors) to hire their employees as independent contractors rather than as employees due to the highly variable workload that is intrinsic to being a construction contractor; in other words this hiring practice is common and accepted in the industry.

Absolutely. The key thing is that the work is variable, and usually project based. If a contractor keeps someone working full time between projects (doing bids, sales, maintaining equipment) they should look into making them full time. Friends of mine who are contractors will have 10 or more guys working for them during a project, but always have one or two guys on staff as full time employees even when they don't have a project going.

[hank0604]

All real estate agents are independent contractors, btw...

[GoCUBS1]

Originally Posted by hank0604

All real estate agents are independent contractors, btw...

So are many successful hairdressers....

If you are the top in your field, I think it's often the best way to go IMO.

[Irishtom29]

Originally Posted by GoCUBS1

If you made a "boatload of money" as a contractor and had all the benefits and protection as an employee, you had a great gig .

I wasn't a "contractor", I was a temporary employee hired out of a union hiring hall. I worked for contractors.

The con is when contractors want to treat their employees as "contractors". Where does that end? Is every employee to be so treated? What stops any employer from calling his employees "contractors" and then screwing them out of their workman's comp, FICA and unemployment insurance? This also has implications as to who's responsible for on the job injuries and their expenses.

I was always on the respectable "big time" side of the construction industry working for people like Bechtel, American Bridge, Chicago Bridge, B&W and CE; where if you wanted to better yourself you didn't do it by tearing down your own conditions as an employee but by moving up into company management as a superintendant or by being a foreman or general foreman. I never worked for a company that would even try treating me as anything other than an employee with rights granted me by law and contract.

[Drover]

Originally Posted by Irishtom29

I wasn't a "contractor", I was a temporary employee hired out of a union hiring hall. I worked for contractors.

The con is when contractors want to treat their employees as "contractors". Where does that end? Is every employee to be so treated? What stops any employer from calling his employees "contractors" and then screwing them out of their workman's comp, FICA and unemployment insurance?

The law does. Unfortunately there is no bright-line rule but rather it's facts and circumstances. The criteria for an employee/IC determination are laid out in IRS Publication 15-A, starting on page 6, with examples following.

http://www.irs.gov/pub/irs-pdf/p15a.pdf

If in doubt, an employer can get a determination from the IRS by submitting form SS-8.

www.irs.gov/pub/irs-pdf/fss8.pdf

[Irishtom29]

Originally Posted by Drover

The law does. Unfortunately there is no bright-line rule but rather it's facts and circumstances. The criteria for an employee/IC determination are laid out in IRS Publication 15-A, starting on page 6, with examples following.

http://www.irs.gov/pub/irs-pdf/p15a.pdf

If in doubt, an employer can get a determination from the IRS by submitting form SS-8.

www.irs.gov/pub/irs-pdf/fss8.pdf

Thanks.

I would think the NLRB has something to say on this too.

[GoCUBS1]

Originally Posted by Irishtom29

I wasn't a "contractor", I was a temporary employee hired out of a union hiring hall. I worked for contractors.

The con is when contractors want to treat their employees as "contractors". Where does that end? Is every employee to be so treated? What stops any employer from calling his employees "contractors" and then screwing them out of their workman's comp, FICA and unemployment insurance? This also has implications as to who's responsible for on the job injuries and their expenses.

I was always on the respectable "big time" side of the construction industry working for people like Bechtel, American Bridge, Chicago Bridge, B&W and CE; where if you wanted to better yourself you didn't do it by tearing down your own conditions as an employee but by moving up into company management as a superintendant or by being sent out of the hall as a foreman or general foreman. I never worked for a company that would even try something as underhanded as treating me as anything other than an employee with rights granted me by law and contract.

I understand what you're saying. I was just pointing out that there are instances where being an independent contractor can be advantageous rather than "being screwed." I have worked with many independent contractors that prefer this status (and the tax breaks it affords) over being an employee.

The difference between a temp employee, full-time/part-time employee, and independent contractor is not always clear-cut. It sometimes takes a labor attorney or court case to work it out. Here's another IRS brochure on it:

http://www.irs.gov/pub/irs-pdf/p1779.pdf

"A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result."

Additional guidelines on who can be considered an independent contractor versus an employee are as follows (from the IRS website):
- Individuals will likely be considered employees if they receive ‘extensive’ (note that the definition of this term is left up to interpretation by the IRS) instruction on:

* how, when or where to do the work they will perform
* what tools or equipment to use
* where to purchase supplies and services

- Individuals will likely be considered employees if they receive training about required procedures and methods.

- Individuals will likely be considered independent contractors if they:
* make significant investment in their work
* do not get directly reimbursed for expenses
* have the ability to make profit or loss on their work
* receive no benefits from the company, such as health insurance and paid vacation

[Drover]

Originally Posted by Irishtom29

Thanks.

I would think the NLRB has something to say on this too.

I'm not sure they do. The NRLB is more concerned with union laws. Seeing how the primary net effect of the different classifications is tax treatment, which is not union-specific, this is pretty squarely an IRS issue.

[Irishtom29]

Originally Posted by Drover

I'm not sure they do. The NRLB is more concerned with union laws. Seeing how the primary net effect of the different classifications is tax treatment, which is not union-specific, this is pretty squarely an IRS issue.

The NLRB weighs in on this too. Here's a general outline from a law firm, though meant to aid employers it seems even handed.

http://www.morganlewis.com/pubs/LEPG...st_11dec08.pdf

I'll ask my daughter tonight. She's a lawyer and interned with a labor law firm here in town. I ought'a get something for all the dough I dished out educating her.