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Independent contractor vs employee for ashrm

Avoiding the pitfalls of mis-classifying your company's workers.

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Employee
Contractor
VS
for
Presented by
Certified Professional Coach
Knowing the
Difference
Protecting Your Business
From Costly Misclassifications!
Sherry Darden
Advantages to Independent Contractor
Relationships
Greatest Reason
Some workers prefer
independent contractor
status — greater
control over work
schedule & location and
more opportunity for
profit.
Great Reason
Quick and
efficient access
to expertise and
experience.
Greater Reason
Flexibility to
expand or contract
workforce to
accommodate
unexpected
workload
fluctuations.
Greatest Employer Reason
Lower employment costs.
Temptations to Misclassify
Unlawful Employment
Discrimination - Title VII
ADEA, ADA, ETC.
Fair Labor Standards Act
- Overtime Obligations
Employee Benefits
– ERISA
Union Organizing
- NLRA
Employment Taxes
Don’t Apply
- FICA
- FUTA
- Withholding
income taxes
Independent
contractors are not
covered by most
employment laws
Creates a sense of
At-Will protection.
Treat Me Like
“Joe, the Plumber”
Ad

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Independent contractor vs employee for ashrm

  • 2. Knowing the Difference Protecting Your Business From Costly Misclassifications!
  • 4. Advantages to Independent Contractor Relationships Greatest Reason Some workers prefer independent contractor status — greater control over work schedule & location and more opportunity for profit. Great Reason Quick and efficient access to expertise and experience. Greater Reason Flexibility to expand or contract workforce to accommodate unexpected workload fluctuations. Greatest Employer Reason Lower employment costs.
  • 5. Temptations to Misclassify Unlawful Employment Discrimination - Title VII ADEA, ADA, ETC. Fair Labor Standards Act - Overtime Obligations Employee Benefits – ERISA Union Organizing - NLRA Employment Taxes Don’t Apply - FICA - FUTA - Withholding income taxes Independent contractors are not covered by most employment laws Creates a sense of At-Will protection.
  • 6. Treat Me Like “Joe, the Plumber”
  • 7. 1. Categories 2. Control 3. Expenses The Independent Contractor Test How you categorize a worker. How you control the worker. How you manage their expenses.
  • 8. Categories If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. Although a contract may state that the worker is an employee or an independent contractor, this is not sufficient to determine the worker’s status. Hire a worker with the expectation that the relationship is for a specific project or period. Don’t offer employee benefits including things like insurance, pension plans, paid vacation, sick days, and disability insurance. What Makes an Independent Contractor ? ?
  • 9. What Makes an Independent Contractor I have a business. I set my own schedule. I can do the work. I can hire others to do it. Control The worker needs to have significant control when, where, and how the work is done. More detailed instructions indicate that the worker is an employee. Less detailed instructions reflects less control, indicating that the worker is more likely an IC. The worker should have freedom of obtaining help or possible replacement of the work for hire. Know that there can be some restrictions do to security issues. If the business provides the worker with training on how to do the job, this indicates employment! I don’t have a business. My work schedule is set. I rec’d training for my job. I can’t delegate my work.
  • 10. What Makes an Independent Contractor Expenses An IC is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay contractors hourly. A time log can be required as supporting documents for an invoice. IC’s are more likely to have unreimbursed expenses than are employees. Can the worker incur a financial risk in the performance or non- performance of services? (i.e. equipment, unfinished duties) Expenses to perform the hired task should be charged, not reimbursed. $
  • 11. 300 60 90 120 180 210 240 270 300 365+ How integral is this position to the company? How essential is this task to the operation of the business? All the Time Regularly Seasonally On Occasions Rarely
  • 12. To Prevent Inheriting Unplanned Employees Keep in Mind It is recommended that you require a contract stating this is not: - an offer of employment, - a term for the work to be completed is included, and - a stated fee for the work. - a task that is essential to the business. Refrain from controlling the when, where, and how the task is to be performed. Prevent offering the IC employee type benefits. Refrain from allowing IC to control your employees (project management).
  • 13. It’s Not How You Pay Them, It’s How You Treat Them! The W’s of Being an Employee Who What When Where & How What Makes An Employee IRS Form SS-8 ? ?
  • 14. It’s Not How You Pay Them, It’s How You Treat Them! When & where to do the work. What tools or equipment to use. What workers they hire or to assist with the work. What work must be performed by a specific individual or what order to follow. Number of hours worked is irrelevant What Makes An Employee ? ?
  • 15. Types of Employees Statutory Delivery Driver A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Statutory Insurance Agent A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Statutory Outside Salesperson A full-time traveling or city salesperson working on your behalf. Turns in orders from wholesalers, detailers, contractors, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. The work performed for you must be the salesperson's principal business activity. Statutory Home Based An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
  • 16. Cost of Misclassification Employee Type FITW FICA SITW FUTA SUTA Common Law Statutory Employee Statutory Nonemployee Independent Contractor
  • 17. Costly Mistakes! May 23, 2014, Lowe's Home Centers agreed to settle a class action brought by its home improvement contractors who allege that they were misclassified as independent contractors instead of employees. The maximum settlement amount, depending on the number of contractors who file claims, is $6,500,000, plus an additional 25% payment for plaintiffs' attorneys. The complaint, originally filed in state court, alleged that Lowe's had the right to control, and did control, all aspects of installation jobs by, among other things, requiring that the installers: • identify themselves as "installers for Lowe's" or "I work for Lowe's"; • wear Lowe's hats and shirts at work sites; • use signs stating "Lowe's Installation"; • attend training by Lowe's; and • comply with Lowe's production requirements.
  • 19. Know that… Step one Federal & state agencies are intent on aggressively investigating misclassification of employees as independent contractors. Step two Proceed with caution! Step three Companies using large numbers of "contractors" or other types of "contingent" workers are most vulnerable. Step four Lawyers for workers view "misclassification" as another chance to snatch big dollars from unprepared, unsuspecting companies. Step six Be consistent!!! Step five It is not what you call the worker, it is how you treat the worker.
  • 20. Watch Blurring the Lines! Controlling the Who, What, When, Where, How, & Why! Employee Can tell them who will do what task Can tell them what task is to be performed Can tell them when the task is to be performed Can tell them where the task is to be perform Can tell them how the task is to be performed Contractor Can control only if there specs/regs requirements As long as there is bona- fide reason If there is a security, or locality reason If there is a security, or locality reason Really only the finished product or same as above
  • 21. Measure twice, cut once! Check…double check…document, document, document…be proactive, not reactive! Main Resources www.IRS.GOV Form SS-8 State Resources www.laworks.net Test similar to IRS, specific to work done in LA. Your Company Your Contracts Your organization Training your managers Questions www.SherryDarden.com sherry@sherrydarden.com
  • 24. Thanks So Much For: • Joining Me! • Recognizing the Need for Clarity! • Recognizing the Need for Compliance! • Participating! Sherry L Darden Certified Professional Coach Certified Master Business Development Specialist www.SherryDarden.com sherry@sherrydarden.com