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

1. Employee
Contractor
VS
for
Presented by
Certified Professional Coach

2. Knowing the
Difference
Protecting Your Business
From Costly Misclassifications!

3. Sherry Darden

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.

18. Costly Mistakes!

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

22. Whew!!!!!

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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

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