Tag Archives: Independent Contractor

05.08.17
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Today’s Tip: Avoid Telling Contractors How to Perform the Work (with Stones lyrics)

IMG_1066The great scholar Mick Jagger reminds his followers that you can’t always get what you want, but if you try sometimes well you might find you get what you need. This is good advice, not just for Mr. Jimmy (who did look pretty ill), but also for companies who use independent contractors.

In a true independent contractor relationship, the hiring entity knows what it needs. It needs results, but the details about how, when, and where to work toward those results are left to the contractor’s discretion. There is no oversight or supervision.

The more direction a company provides a contractor on how to perform the work, the more likely the contractor is misclassified and the relationship will be deemed employment. You might want to control these things, but if they are not necessary to get what you need, then you should try sometimes and you might find you can get what you need without exerting extra control over the contractor. Continue reading →

05.04.17
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New Florida Law Grants Independent Contractor Status to App-Based Drivers

IMG_1064In December 1965, the Beatles released Rubber Soul, which led with Drive My Car.  (“Asked a girl what she wanted to be/She said Baby, can’t you see?/I want to be famous, a star on the screen/But you can do something in between.”) You can thank me later for getting that song stuck in your head all day.

Under a new Florida law, online ride hailing service are singing “Baby you can drive my car, and maybe I’ll love you.” If certain easy-to-meet conditions are satisfied, drivers for online ride hailing services are declared independent contractors by law, not employees. This new law protects Uber, Lyft, and similar services from misclassification class actions brought under state law.

The requirements for being granted independent contractor status under the new law are simple. Continue reading →

04.17.17
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Unpaid Internships: Six Tips For Avoiding Minimum Wage Requirements

student unpaid internship frog-1339892_1920It’s summer intern hiring season. Can your interns be unpaid? If you pay them something, can you pay a small stipend that amounts to less than minimum wage?

Wage and hour laws dictate when a summer intern must be paid like a regular employee, with a required minimum wage and eligibility for overtime. Seasonal amusement and recreational establishments (such as summer camps or some amusement parks) may qualify for a special exemption, but this post is focused on more conventional year-round businesses.

Here are six tips for maintaining unpaid internship status: Continue reading →

04.13.17
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Are Independent Contractors Exempt from the FLSA?

hurry-FLSA-independent contractor -2119711_1920Sort of. The Fair Labor Standards Act (FLSA) covers only employees, not independent contractors. The FLSA’s requirements on minimum wage and overtime, therefore, do not apply to independent contractors.

But wait, dear reader, don’t click away quite yet! There’s more! The real question is whether your independent contractor is really an independent contractor.

The question of Independent Contractor vs. Employee is determined under the FLSA by applying an Economic Realities Test to the facts of the relationship, not by deferring to how the parties have characterized they relationship.

The Economic Realities Test evaluates whether the worker is economically reliant on the company for which services are being provided, as opposed to in business for himself/herself.

I have written about the Economic Realities Test here, walking the reader through the various factors that courts and the DOL use to determine Who Is My Employee? under the FLSA.

The bottom line: A true independent contractor is not covered by the FLSA, but an Economic Realities analysis must be applied to determine whether a worker is truly an independent contractor.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

04.10.17
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How Can There Be Misclassification When The Worker Prefers to Be an Independent Contractor?

Alan Hudock

Photo of Singer Dave Mason (We Just Disagree), by Alan Hurtock

Let’s start with this: Everyone is happy being an independent contractor until they’re not.

What do I mean by that? Right now, the relationship works. The contractor performs, and you pay for the work.

But what happens when things go south? As soon as you decide you no longer need those services, the contractor might stop being your BFF.

A disgruntled former contractor has some options, all of which involve some variation of this story: “Once upon a time, I was misclassified and should have been an employee.” None of the former contractor’s possible next steps are good for you: Continue reading →

04.06.17
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What is the IRS Voluntary Classification Settlement Program (VCSP)? How Can It Limit Misclassification Liability?

dollar-independent contractor misclassification-IRS-VCSP-1443244_1920The IRS offers a settlement option for companies that suspect they have been misclassifying their independent contractors and wish to reclassify them as employees.

The Voluntary Classification Settlement Program (VCSP) requires companies to meet certain eligibility criteria to participate but, in exchange, the IRS rewards participating companies with a steep discount off potential back taxes and penalties.

To participate in VCSP, a company:

  1. Must declare its intent to reclassify one or more independent contractors as employees;
  2. Must have consistently treated this class of workers as non-employees;
  3. Must have filed Forms 1099 for payments made to these employees; and
  4. Cannot be under a misclassification audit by the IRS, DOL, or a state government.

Benefits for participating companies include:

  1. Pay only 10 percent of the employment tax liability that would have been due on compensation paid to the workers for the most recent tax year, determined under the reduced rates of section 3509(a) of the Internal Revenue Code. See VCSP FAQ 15, for information on how payment under the VCSP is calculated. Also see Instructions to Form 8952;
  2. No liability for any interest and penalties on the amount; and
  3. No IRS employment tax audit with respect to the worker classification of the workers being reclassified under the VCSP for prior years.

The settlement process requires companies to sign a closing agreement with the IRS.

Is this a good deal? It can be, but it depends on the overall circumstances. Some factors to consider before applying include: Continue reading →

04.03.17
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What is an ABC Test? (and why these tests are a problem)

abc

As we know, there are a variety of tests used to determine Independent Contractor vs. Employee, and the proper test varies depending of the law being applied.

Most of these tests are balancing tests. A variety of factors are considered, and no single factor is determinative.

ABC tests, however, are different. ABC tests start with a presumption that a contractor is an employee, then requires a company to prove each of three factors to protect a contractor’s status as a contractor.

ABC tests tend to apply only to state unemployment coverage laws and, less commonly, to
state workers’ compensation laws. Continue reading →

03.30.17
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Four Ways to Give Up Control and Protect Independent Contractor Status

run

Retaining control over how independent contractors do their work can sink an otherwise legitimate independent contractor relationship.

Fortunately, steps can almost always be taken to give up aspects of control that do not hurt the business case for using a contractor instead of an employee. Companies need to be thoughtful and proactive, though, in evaluating and modifying these relationships — before they are challenged in a misclassification claim.

Here are four aspects of control you may be able to relinquish in your relationships with independent contractors: Continue reading →

03.23.17
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Today’s Tip: Avoid Blurring Lines Between Independent Contractors and Employees

side-by-side

This mistake may seem obvious, but companies do it all the time.  When an independent contractor is performing the same work as employees, the contractor is likely to be deemed an employee.

Remember, the determination of whether someone is an independent contractor or an employee is made based on the facts of the relationship, not what the parties call it. If the facts are that a contractor is doing the same work, in the same location, with the same instructions, and under the same supervision as an employee, then the contractor is likely an employee and should be paid as an employee.

I am not suggesting there is any problem using staffing agency workers or temp-to-hire.  Those workers are being paid by the staffing agency as employees. That is, their paychecks show withholdings and deductions, and their pay is reported by the staffing agency on a W-2, not a 1099. These are employees of the staffing agency (and very possibly your joint employees, but that’s a separate issue).

The issue addressed in this post is the use of 1099 independent contractors to perform the same type of work as employees.  If the work performed by an employee is employment, then it is very hard to maintain the position that the same work being performed by a contractor is not employment.

Summary: Avoid assigning contractors to perform the same work as employees.  When individual contractors and employees work side-by-side doing the same thing, the likelihood of misclassification is high.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

03.20.17
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Are You Protecting Confidential Information When Using Independent Contractors? Try These 2 Tips.

confidential information - independent contractors - top-secret-1076813_1920Do your independent contractors have access to confidential information?  Does your independent contractor agreement provide you with sufficient protection?

Tip #1: Be sure your independent contractor agreement includes a Confidential Information section. It should prohibit the contractor from using or disclosing confidential information at any time, including after the retention is completed.

Be sure, however, to consider these carve-outs to allow disclosure under these limited circumstances:

  1. When a subpoena or court order requires, but consider requiring the contractor to provide advance notice so you have the opportunity to contest the potential disclosure.
  2. To a government agency, as part of a complaint or investigation. The SEC and DOL/OSHA have taken the position that it is a violation of federal whistleblower laws to have a Confidential Information clause that is so broad that it prohibits revealing confidential information to a government agency when whistleblowing. Under this whistleblowing scenario, you cannot require the individual to alert you to the disclosure first.
  3. Under circumstances described in the Defend Trade Secrets Act (DTSA), which took effect in 2016. Under DTSA, a company can recover additional damages and attorney fees if an individual improperly discloses the company’s trade secrets if the company provides advance notice to individuals of their DTSA rights.

Here is a sample DTSA disclosure:

You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (x) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade secret, except pursuant to court order.

Tip #2: One other point to remember — and this is a common mistake: Make sure that when the agreement expires, the obligation not to disclose confidential information remains in effect. I have seen too many termination clauses where the agreement terminates, not just the relationship. If the entire agreement terminates, you may accidentally be terminating the contractor’s obligation to preserve confidential information after the engagement ends.

When you end an engagement, you probably want to terminate the engagement, not the entire agreement.

Have fun out there!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.