INDEPENDENT CONTRACTORSGREAT ALTERNATIVE OR INVITATION FOR TROUBLE              By Mark V. Heusel         mheusel@dickinso...
EMPLOYEE vs INDEPENDENT CONTRACTOR       Have you ever felt like this? You’ve heard the hype, do you know what’s right?
Why you should care       Benefits of an Independent Contractor   Flexibility   Less administration   No payroll taxes...
Why you should care           Benefits of an Employee Control Loyalty from Eee Commitment (time) Worker appeal Protec...
who cares?EMPLOYEE MISCLASSIFICATION:           Employee vs Independent Contractor
who else is watching?Interagency Task Force on Employee Misclassification“The task force has been directed to study the pr...
What can trigger an investigation? Injury to a worker - worker’s compensation The end of a job assignment - unemployment...
misclassification hazardspayment of Eee’s         worker’s comptaxes                     sick leave/time offIRS penalt...
The Rules1) The IRS’s Common Law Test    - Payroll taxes, social security,       medicare, and unemployment       (FUTA)2)...
The IRS’s Common Law RuleEvidence of the degree of control and independence1) Behavioral control:     - Instructions given...
The IRS’s common law rule3) Type of relationship:      - How do the parties describe their relationship in writing      - ...
Michigan’s Rule           Look at the economic reality of the relationship:1)   Liability of Eer if relationship terminate...
Keys to success Assess each situation on its own merits Written Agreement. Written Agreement. Written Agreement. What w...
DisclaimerThis slide presentation is informational only and was prepared tosummarize relevant issues related to independen...
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January 2011 - Business Law & Order - Mark Heusel

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Hiring practices; Employees vs Independent Contractors; Wage & Hour Issues; Discrimination Issues; Whistleblower protection; Best practices

Mark Heusel is a Member of Dickinson Wright, PLLC’s Ann Arbor office. Dickinson Wright is a international law firm with offices in Michigan, Washington D.C., Nashville, Phoenix, Las Vegas and Toronto. Mr. Heusel works with companies in a variety of circumstances in the commercial litigation and employment law areas. He has substantial experience in advising clients on a host of employment related issues, including litigation avoidance, human resource issues, discrimination and wrongful termination litigation, non-compete and trade secret matters, and business practices. He is also a frequent lecturer and author on these issues and when necessary, a vigorous litigator.

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January 2011 - Business Law & Order - Mark Heusel

  1. 1. INDEPENDENT CONTRACTORSGREAT ALTERNATIVE OR INVITATION FOR TROUBLE By Mark V. Heusel mheusel@dickinsonwright.com
  2. 2. EMPLOYEE vs INDEPENDENT CONTRACTOR Have you ever felt like this? You’ve heard the hype, do you know what’s right?
  3. 3. Why you should care Benefits of an Independent Contractor Flexibility Less administration No payroll taxes No benefits Avoid workers comp, unemployment, and OT Less legal exposure Lower overhead
  4. 4. Why you should care Benefits of an Employee Control Loyalty from Eee Commitment (time) Worker appeal Protection ofyour assets (trade-off)
  5. 5. who cares?EMPLOYEE MISCLASSIFICATION: Employee vs Independent Contractor
  6. 6. who else is watching?Interagency Task Force on Employee Misclassification“The task force has been directed to study the problem of employee misclassification, developways of improving communication and public awareness of the problem, coordinate andstrengthen enforcement mechanisms in the state and other jurisdictions and makerecommendations for legislative action where needed.Misclassification most commonly occurs when an employer hires a worker and improperlyclassifies the worker as an “independent contractor,” rather than as an “employee.” Thepractice is harmful to employers, workers and taxpayers. Employee misclassification creates anunfair competitive advantage for employers, prevents misclassified employees from receivingcertain benefits and causes government to lose out on important tax revenues.As the Department of Treasury noted, “The understated taxes of these employers andemployees means less revenue to the state and less funds for K-12 education, local units ofgovernment, health and social programs, colleges, and police and fire protection.”’
  7. 7. What can trigger an investigation? Injury to a worker - worker’s compensation The end of a job assignment - unemployment Disgruntled Worker - potential wage and hour claim Random Audit - industry targeted Experience with past contractors
  8. 8. misclassification hazardspayment of Eee’s worker’s comptaxes sick leave/time offIRS penalties/interest medical insurancewage/hour penalties pension/401Kunpaid overtimeback benefitspaid vacation
  9. 9. The Rules1) The IRS’s Common Law Test - Payroll taxes, social security, medicare, and unemployment (FUTA)2) The State of Michigans Test - Unemployment, worker’s compensation
  10. 10. The IRS’s Common Law RuleEvidence of the degree of control and independence1) Behavioral control: - Instructions given to the worker. How, when, where to work? - Training is also important.2) Financial control: - Extent of worker’s unreimbursed business expenses - Extent of worker’s investment - Extent that worker provides services to others - How the worker is paid - Extent worker can realize profit/loss
  11. 11. The IRS’s common law rule3) Type of relationship: - How do the parties describe their relationship in writing - Does the worker receive employee-type benefits - The permanency of the relationship - Extent to which services performed by the worker are a key aspect of the regular business of the company.
  12. 12. Michigan’s Rule Look at the economic reality of the relationship:1) Liability of Eer if relationship terminates at will?2) Is work performed integral to the Eer’s business?.3) Does Eee depend on wages for living expenses?4) Does the Eee furnish equipment and materials?5) Does Eee hold himself out to the public to perform same tasks?6) Is work customarily performed by an independent contractor?7) Factors of control, payment of wages, maintenance of discipline, and the right to hire and fire employees.8) Weighing those factors which will most favorably effectuate the purposes of the Michigan Employment Security Act.
  13. 13. Keys to success Assess each situation on its own merits Written Agreement. Written Agreement. Written Agreement. What would you expect from someone painting your house?  insurance  invoices  autonomy
  14. 14. DisclaimerThis slide presentation is informational only and was prepared tosummarize relevant issues related to independent contractors. Itdoes not constitute legal or professional advice. You areencouraged to consult with a Dickinson Wright attorney if you havespecific questions relating to any of the topics covered in thispresentation.

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