Companies misclassifying workers as independent contractors (Chicago: health insurance, credit card, employment)

[contractor#1]

Has anyone been affected by companies using independent contractors instead of employees. Is this a common practice in IL. My ex girlfriends father works as an independent contractor and uses random people from bars, people who are laid off from union jobs to work for him. He calls them independent contractors and says that he can save money this way by not paying unemployment and FICA for the contractor's.also, doesn't even file w-2s. I was just wondering if anyone else has heard of this sort of business practice and how do they get away with it..I thought IL was a strong union state

[Drover]

Does he hire these guys to come in 9-5 every day in a standard "employment-at-will" arrangement where both parties presume the employee will come in every day without regard for the work load until one tells the other differently? Or does he hire them on a project-by-project basis with the understanding that once the project is completed they may not work for him again until the next project rolls in, or possibly ever? If the latter, he has a pretty legit claim to consider them independent contractors. If the former, he's pushing the envelope of the law.

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.

[Attrill]

It's common nationwide. When I was in my 20's I worked in situations like that in Chicago, Boston and San Francisco. In every case I worked at the job full time for over a year with a company business card, credit card, cell phone, etc. One company would even line up jobs with other companies for me once every 4-6 months to cover their asses.

[Irishtom29]

It may be common but the employees are getting a screwing. I worked construction out of a union hiring hall for 35 years and was treated as a proper employee by every contractor I worked for. My social security, unemployment and comp were paid just as with any employee.

Just because an employee is employed on a short term basis is no reason he shouldn't be given the same protections under law as one employed on a long term basis. I think that with the Democrats back in power we'll see the NLRB cracking down on this subterfuge. But people will need the backbone to complain, when people are content to be screwed it's hard to help them.

[Attrill]

Originally Posted by Irishtom29

It may be common but the employees are getting a screwing.

Absolutely. Anytime someone is working at one place for a year or more and is still getting a 1099 form they should look into the legality of the situation. I got smarter about that as I got older.

[GoCUBS1]

I know plenty of workers who prefer being a contractor vs. an employee. Contractors can usually bill a higher hourly rate and they can bill overtime hours. They also have a more flexible schedule allowing them to take on additional jobs. And there are tax and lifestyle advantages to being self-employed. Many can be covered under a spouse's insurance or qualify for group insurance/benefits for the self-employed.

In this lay-off market, I don't think a full-time employee's job is any more protected than a contractor's job. When companies start trimming the employees, they bring in the contractors. Contractors often have the updated skills and a good local network to land another project.

[GoCUBS1]

Originally Posted by Irishtom29

It may be common but the employees are getting a screwing.

But are they really getting screwed if they're getting a boatload of money and a flexible lifestyle? I can think of one contractor (an electrician) who worked for the same company for 10 years. He did VERY well and didn't want to be an employee. The company kept paying him because the clients loved him and he was so good (and product specialized) at what he did.

[Attrill]

Originally Posted by GoCUBS1

But are they really getting screwed if they're getting a boatload of money and a flexible lifestyle?

There certainly are legitimate contracting situations, but there are also a lot of employers who are just getting out of taxes, health insurance, vacation benefits, etc. without paying the contractors "boatloads of money" or giving a flexible lifestyle. The OP is asking about people being misclassified, if a company is controlling how, what, where, and when a job is done the person is not an independent contractor. The amount that someone has to be paid as a contractor to match the pay and benefits of an employee is pretty high - a lot of money is needed to cover the self employment tax alone, never mind health and retirement benefits.

[Irishtom29]

Originally Posted by GoCUBS1

But are they really getting screwed if they're getting a boatload of money and a flexible lifestyle? I can think of one contractor (an electrician) who worked for the same company for 10 years. He did VERY well and didn't want to be an employee. The company kept paying him because the clients loved him and he was so good (and product specialized) at what he did.

Yeah, they're getting screwed if they're not getting social security, unemployment and workmen's comp; things that they're entitled to as employees. And it puts pressure on workers who want the benefits to forgo them; in other words it drags others down.

I made a boatload of money and had a flexible lifestyle too. And I also had the benefits and protections that as an employee I was entitled to. As ole Attrill said above there are legit contracting situations and those in which employees are misclassified in order to screw them.

[GoCUBS1]

Originally Posted by Irishtom29

Yeah, they're getting screwed if they're not getting social security, unemployment and workmen's comp; things that they're entitled to as employees. And it puts pressure on workers who want the benefits to foregoe them; in other words it drags others down.

I made a boatload of money and had a flexible lfestyle too. And I also had the benefits and protections that as an employee I was entitled to. As ole Attrill said above there are legit contracting situations and those in which employees are misclassified in order to screw them.

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. Having a salaried job w/out benefits in this market is still better than many have it. Many businesses are barely keeping their heads above water. Fair or not, cutting benefits is a way to cut costs. A small business (w/fewer employees) is not obligated to provide these benefits and employees are not "entitled" to this. Employees should approach the owner about changing their status or find another job.

If you have the drive and highly marketable skills, you are often better off financially as a contractor. You can purchase your own employment/worker's comp and retirement IRA's, annuities, etc. that perform better than social security. Of course, there are workers who better fit the 9-to-5 employee role and need the stability (and perceive it has less risk). But these full-time employees are often paid less.

I started out as a contractor and am now a small business owner. I am not legally obligated to provide my employees with benefits (and did not do so for several years). However, our business has grown and I now provide benefits (insurance, 401K) as an incentive to attract higher-level employees. The benefits also provide some tax advantages to the business. I also hire contractors per project. I treat them well, train them, pay them above market wages and they are quite happy with the arrangement. They have a good paying job in this market. I would never even think of providing my contractors with any benefits and they've never requested this. And this is all legal and common practice in our industry.