This document discusses the legal factors used to determine if mashgichim (kosher supervisors) should be classified as employees or independent contractors. It outlines 20 common law factors and tests used by the IRS, Department of Labor, and state agencies. If mashgichim are employees, companies must pay certain taxes and adhere to employment laws. But classifying someone as a contractor avoids these requirements. The document analyzes court cases on mashgichim and provides tips for companies to structure relationships in a way that supports a contractor classification.
Independent Contractors v. Employees-- How to Avoid MisclassificationDeirdreJ6972
Employers are fans of independent contractors, for some obvious reasons. The IRS and Department of Labor know this too. Don\'t get caught misclassifying your employees as contractors. Be smart and be wary.
The Ruby Files: The Case of the Disappearing Secrets and an Independent Contr...Polsinelli PC
In the fourth of our webinars on The Ruby Files: Managing the Challenging Employee, we continue to follow Ruby as her changing circumstances present her employers with a variety of legal complications.
Fresh off claims of sexual harassment and age discrimination at a bank, Ruby applies at a relatively new company in the technology industry, which is experiencing challenges relating to recruitment and employment. Ruby is hired as an independent contractor, but things don’t quite work out. She quits, and then claims constructive discharge because of her working conditions. After Ruby’s departure the company discovers that she has taken client lists and other proprietary materials on her way out the door. What is the company’s next move?
Because growing employers are typically focused on the “big stuff,” such as profitability and selling their products and services, they sometimes overlook the seemingly “small stuff,” such as complying with detailed and employee-oriented state and federal labor laws. As growing employers transition to large employers, they often carry with them legacy policies and practices that violate seemingly trivial provisions that nevertheless come with steep penalties that can reach into the millions of dollars. Plaintiffs’ lawyers know this and are targeting growing employers with growing pocketbooks.
Nuts and Bolts of Filling in the New I-9 Formgueste6c2c1
Puzzled by the New I-9 Form effective April 3, 2009? This powerpoint highlights the "Nuts and Bolts" of the new Form and its List of Acceptable Documents. Join the 300 companies who have participated in the national webinar on this topic. Need follow up training and a report card on how well you are doing with your I-9s. email enorman@williamsmullen.com.
Project Employees: Specific Project or Undertaking. While the Philippine Labor Code acknowledges project employment, Supreme Court decisions has placed limitations. If certain conditions are met, project employees will be deemed regular employees.
The New Aggressive Face of DHS - Verifying Petitions and Applications. H-1B Visa Site Visits and Investigations. Wage and Hour Investigations. Interrogations at the Port-of-Entry.
Independent Contractors v. Employees-- How to Avoid MisclassificationDeirdreJ6972
Employers are fans of independent contractors, for some obvious reasons. The IRS and Department of Labor know this too. Don\'t get caught misclassifying your employees as contractors. Be smart and be wary.
The Ruby Files: The Case of the Disappearing Secrets and an Independent Contr...Polsinelli PC
In the fourth of our webinars on The Ruby Files: Managing the Challenging Employee, we continue to follow Ruby as her changing circumstances present her employers with a variety of legal complications.
Fresh off claims of sexual harassment and age discrimination at a bank, Ruby applies at a relatively new company in the technology industry, which is experiencing challenges relating to recruitment and employment. Ruby is hired as an independent contractor, but things don’t quite work out. She quits, and then claims constructive discharge because of her working conditions. After Ruby’s departure the company discovers that she has taken client lists and other proprietary materials on her way out the door. What is the company’s next move?
Because growing employers are typically focused on the “big stuff,” such as profitability and selling their products and services, they sometimes overlook the seemingly “small stuff,” such as complying with detailed and employee-oriented state and federal labor laws. As growing employers transition to large employers, they often carry with them legacy policies and practices that violate seemingly trivial provisions that nevertheless come with steep penalties that can reach into the millions of dollars. Plaintiffs’ lawyers know this and are targeting growing employers with growing pocketbooks.
Nuts and Bolts of Filling in the New I-9 Formgueste6c2c1
Puzzled by the New I-9 Form effective April 3, 2009? This powerpoint highlights the "Nuts and Bolts" of the new Form and its List of Acceptable Documents. Join the 300 companies who have participated in the national webinar on this topic. Need follow up training and a report card on how well you are doing with your I-9s. email enorman@williamsmullen.com.
Project Employees: Specific Project or Undertaking. While the Philippine Labor Code acknowledges project employment, Supreme Court decisions has placed limitations. If certain conditions are met, project employees will be deemed regular employees.
The New Aggressive Face of DHS - Verifying Petitions and Applications. H-1B Visa Site Visits and Investigations. Wage and Hour Investigations. Interrogations at the Port-of-Entry.
Ready for the New Form I-9? A Step-by-Step Guide to 100% I-9 Compliance in 2017Snag
New year, new Form I-9. Given the big jump in fines that took effect in August for mistakes/omissions on Form I-9, the deadline to comply and use the new version is more important than ever.
Even first offense mistakes on an employment verification form can cost you anywhere from $178 to $4,313 per violation … not to mention the brand damage, loss of workforce and increase in operating costs that come along with it.
Check out our “Ready for the New Form I-9?” webinar presentation, featuring our Form I-9 subject matter expert with U.S. Citizenship and Immigration Services, Dave Basham, to:
-- Understand all of the new blocks added to the Form I-9 and how that affects your current hiring process
-- Learn the differences between the paper copy, the “fillable” PDF version and the version used with talent management software
-- Get USCIS’ insider best practices to decrease your time-to-hire and avoid common Form I-9 mistakes
-- Find out must-know tips to avoid getting “in the weeds” with your company-wide I-9 compliance process
20 Factor Test Employee Or Sub Contractordmaaskant
This document gives greater detail on the 20 Factors the IRS and other taxing agencies use during an audit. Much more clear than the IRS publication, but note - not published by the IRS.
What Employers Must Know to Safeguard Business From Costly H-1B Visa ViolationsBadmus & Associates
What you will learn on the Webinar :
1 Who is responsible for attorney fees and application costs associated with the H-1B petition.
2 How to document and support the salary offered for the H-1B position and avoid wage disputes and claims.
3 When employers are required to onboard and pay the new H-1B employee.
4 How to deal wih company structure, employment conditions, and other changes that affect your H-1B worker's immigration status.
5 What are the recordkeeping requirements mandated by the Department of Labor (DOL) and how to maintain records that will survive a DOL audit.
6 The timelines and deadlines you must observe to avoid loss of legal status and employment eligibility of your H-1B employee.
7 The three steps you must undertake to effectively terminate employment of your H-1B workers.
8 How to prepare for and survive government audits of your H-1B visa compliance program, and much more ...
What is Control in Contracting and Subcontracting?JDP Consulting
The one who controls is the employer. DOLE D.O. 174-17 clearly emphasizes that a contractor who does not actively control the performance of the assigned personnel will be considered to be engaged in labor-only contracting. In such a case, the Principal shall be deemed the employer. Accordingly, the Principal may be held liable for monetary claims, and even illegal dismissal.
"Valid Termination: Substantive and Procedural Requirement under the Labor Code of the Philippines" presented by a Senior Corporate Lawyer of Kittelson & Carpo Consulting. Discussion Topic from ANZCHAM Coffee Mornings - October 28, 2015
How to Avoid Costly Wage & Hour Pitfalls for Construction, Engineering & Land...EPAY Systems
Join litigators from Seyfarth Shaw, the top U.S. labor law firm, as they share do’s, don’ts, tips, and traps for employers in the construction, engineering and landscaping industries.
Seyfarth Shaw attorneys Rebecca Bromet and Kyle Petersen will discuss:
Litigation trends and recent settlements in the construction industry, and what they mean to you
Your greatest compliance risks (you may be surprised) and how to avoid them
The ‘riskiest’ times of day for construction, engineering & landscaping employers
Simple safeguards that can keep you out of court
For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized.
New Form I-9 Changes—Here's what you need to know before Sept. 18, 2017 | Sna...Snag
Join Snagajob's free webinar with U.S. Immigration Law and Compliance attorney Curtis Y. Chow to find out what's changed on the new Form I-9 and what today's HR leaders should do now to prepare for the Sept. 17 deadline.
To watch the on-demand recording of this webinar on Snagajob's website, click here: https://goo.gl/vVyzu1
1099 v. W-2 Employees: What to Know and Why It Matters
By Patricia Godfrey of Oasis Outsourcing (www.oasisadvantage.com)
Presented at the April 2012 Lighthouse Speaker Series (http://lighthousegrowthresources.com/speaker_series.html)
www.lighthousegrowthresources.com
www.uncommonwisdomblog.com
Employees vs. Independent Contractors - James IrvingTrine Medina
James Irving presented on the differences of classifying an employee as an employee, independent contractor or intern and why it matters. He also provided guidance on what employers should to reduce the risks associated with misclassification.
Independent Contractor or Employee: Avoiding the Game of Guess Whobenefitexpress
Uber is in the news for a multimillion dollar settlement following a dispute over whether their drivers are employees or independent contractors, and they aren’t the only ones. Misclassifying an employee as an independent contractor is one of the costliest mistakes an employer can make.
Sort out which your employees are and learn your options for reclassifying workers in the webinar you literally can’t afford to miss.
Emploment law issues for the gig economyRoger Royse
Discussion on misclassification of employment, managing risks of employment, strategies for avoiding misclassification, and changes in the legal landscape with regards to employment
Employment Law Issues for the Gig EconomyRoger Royse
Discussion on misclassification of employment, managing risks of employment, strategies for avoiding misclassification, and changes in the legal landscape with regards to employment.
An individual who contracts with an entity to perform a service independent of the entity’s management and control is considered to be an Independent Contractor (IC)
Ready for the New Form I-9? A Step-by-Step Guide to 100% I-9 Compliance in 2017Snag
New year, new Form I-9. Given the big jump in fines that took effect in August for mistakes/omissions on Form I-9, the deadline to comply and use the new version is more important than ever.
Even first offense mistakes on an employment verification form can cost you anywhere from $178 to $4,313 per violation … not to mention the brand damage, loss of workforce and increase in operating costs that come along with it.
Check out our “Ready for the New Form I-9?” webinar presentation, featuring our Form I-9 subject matter expert with U.S. Citizenship and Immigration Services, Dave Basham, to:
-- Understand all of the new blocks added to the Form I-9 and how that affects your current hiring process
-- Learn the differences between the paper copy, the “fillable” PDF version and the version used with talent management software
-- Get USCIS’ insider best practices to decrease your time-to-hire and avoid common Form I-9 mistakes
-- Find out must-know tips to avoid getting “in the weeds” with your company-wide I-9 compliance process
20 Factor Test Employee Or Sub Contractordmaaskant
This document gives greater detail on the 20 Factors the IRS and other taxing agencies use during an audit. Much more clear than the IRS publication, but note - not published by the IRS.
What Employers Must Know to Safeguard Business From Costly H-1B Visa ViolationsBadmus & Associates
What you will learn on the Webinar :
1 Who is responsible for attorney fees and application costs associated with the H-1B petition.
2 How to document and support the salary offered for the H-1B position and avoid wage disputes and claims.
3 When employers are required to onboard and pay the new H-1B employee.
4 How to deal wih company structure, employment conditions, and other changes that affect your H-1B worker's immigration status.
5 What are the recordkeeping requirements mandated by the Department of Labor (DOL) and how to maintain records that will survive a DOL audit.
6 The timelines and deadlines you must observe to avoid loss of legal status and employment eligibility of your H-1B employee.
7 The three steps you must undertake to effectively terminate employment of your H-1B workers.
8 How to prepare for and survive government audits of your H-1B visa compliance program, and much more ...
What is Control in Contracting and Subcontracting?JDP Consulting
The one who controls is the employer. DOLE D.O. 174-17 clearly emphasizes that a contractor who does not actively control the performance of the assigned personnel will be considered to be engaged in labor-only contracting. In such a case, the Principal shall be deemed the employer. Accordingly, the Principal may be held liable for monetary claims, and even illegal dismissal.
"Valid Termination: Substantive and Procedural Requirement under the Labor Code of the Philippines" presented by a Senior Corporate Lawyer of Kittelson & Carpo Consulting. Discussion Topic from ANZCHAM Coffee Mornings - October 28, 2015
How to Avoid Costly Wage & Hour Pitfalls for Construction, Engineering & Land...EPAY Systems
Join litigators from Seyfarth Shaw, the top U.S. labor law firm, as they share do’s, don’ts, tips, and traps for employers in the construction, engineering and landscaping industries.
Seyfarth Shaw attorneys Rebecca Bromet and Kyle Petersen will discuss:
Litigation trends and recent settlements in the construction industry, and what they mean to you
Your greatest compliance risks (you may be surprised) and how to avoid them
The ‘riskiest’ times of day for construction, engineering & landscaping employers
Simple safeguards that can keep you out of court
For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized.
New Form I-9 Changes—Here's what you need to know before Sept. 18, 2017 | Sna...Snag
Join Snagajob's free webinar with U.S. Immigration Law and Compliance attorney Curtis Y. Chow to find out what's changed on the new Form I-9 and what today's HR leaders should do now to prepare for the Sept. 17 deadline.
To watch the on-demand recording of this webinar on Snagajob's website, click here: https://goo.gl/vVyzu1
1099 v. W-2 Employees: What to Know and Why It Matters
By Patricia Godfrey of Oasis Outsourcing (www.oasisadvantage.com)
Presented at the April 2012 Lighthouse Speaker Series (http://lighthousegrowthresources.com/speaker_series.html)
www.lighthousegrowthresources.com
www.uncommonwisdomblog.com
Employees vs. Independent Contractors - James IrvingTrine Medina
James Irving presented on the differences of classifying an employee as an employee, independent contractor or intern and why it matters. He also provided guidance on what employers should to reduce the risks associated with misclassification.
Independent Contractor or Employee: Avoiding the Game of Guess Whobenefitexpress
Uber is in the news for a multimillion dollar settlement following a dispute over whether their drivers are employees or independent contractors, and they aren’t the only ones. Misclassifying an employee as an independent contractor is one of the costliest mistakes an employer can make.
Sort out which your employees are and learn your options for reclassifying workers in the webinar you literally can’t afford to miss.
Emploment law issues for the gig economyRoger Royse
Discussion on misclassification of employment, managing risks of employment, strategies for avoiding misclassification, and changes in the legal landscape with regards to employment
Employment Law Issues for the Gig EconomyRoger Royse
Discussion on misclassification of employment, managing risks of employment, strategies for avoiding misclassification, and changes in the legal landscape with regards to employment.
An individual who contracts with an entity to perform a service independent of the entity’s management and control is considered to be an Independent Contractor (IC)
Independent Contractors vs. Employees: Classification and CorrectionDeirdreJ6972
Employees, independent contractors....what's the difference? From the perspective of the government, everything. This is basic course on employee classification and correction.
This presentation discusses the ramifications to your business and the changes required, all as a result of the long awaited Ohio Municipal reform (H.B. 5). This presentation will assist you in analyzing and determining the steps your business must take to be in compliance all in the name of conformity.
Part of our ERISA Compliance Series, this webinar is hosted by ERISA Attorney Larry Grudzien and moderated by chief marketing officer Julia Goebel. This webinar will discuss the top wage and hour issues that may be unknowingly lurking within your company.
HR Webinar: Employee vs. Contractor: Changes That Will Impact All EmployersAscentis
Although the pandemic-related recession had a brief downward impact on gig workers overall, the trend is clear: being your own boss is a concept gaining popularity at an impressive rate. The overall number of Americans classifying themselves as freelancers rose from 53 million to 59 million from 2014 to 2020. And even the core classification of self-employed individuals (incorporated or not) has risen by 17 percent in just one year – from 8.221 million in April, 2020, to 9.651 million in April, 2021, according to the Bureau of Labor Statistics.
The rapid growth in the ranks of independent contractors has naturally spurred greater interest in the regulations surrounding worker classification – both in terms of the loss of benefits and protections for those leaving traditional employment, and the potential for abuse of the worker classification process by employers.
During the last year, the states have been brewing up their own changes in employment classification laws, led by California’s AB 5, which was passed, then repealed and replaced with AB 2257. At the federal level, with the transition to single-party control in the House, Senate (barely) and Presidency, the Protecting the Right to Organize (“PRO”) Act (H.R. 842) is making its way through Congress, and may even find a home inside the massive infrastructure bill now being debated on Capitol Hill. The PRO Act, as currently written, would include the most comprehensive amendment to the terms “employee,” “employer,” and “supervisor,” since the Fair Labor Standards Act of 1938 became law.
So how will all of these convergent changes settle out? And most importantly, how can employers plan for the expected changes on this contentious topic?
In this section of "Rise of the Machines: Avoiding the Legal Pitfalls of App Development" Roger Royse, founder of the Royse Law Firm, discusses:
1. Misclassification: Independent Contractor vs. Employee
2. Managing Risk: What Are the Direct & Indirect Costs
3. Strategies for Avoiding Misclassification
4. Reporting
Similar to Mashgichim Independent Contractors or Employees 2-8-17 (20)
2. Who Cares?
• IRS
– More difficult to collect income taxes from
independent contractors
• HHS
– More difficult to collect payroll taxes from
independent contractors
• Department of Labor
– Potential abuse of minimum wage and overtime
laws
– Potential abuse of anti-discrimination laws
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3. Who Cares?
• State Department of Revenue
– More difficult to collect income taxes from
independent contractors
• State Unemployment Agency
– Employers are not contributing to the UI fund
• State Workers’ Compensation Agency
– Workers are not protected
– Employers are not contributing to the WC Fund
www.agdglaw.com
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4. Who Makes the Determination?
• IRS
• Department of Labor
• NLRB
• State Agencies
www.agdglaw.com
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5. The 20 Common Law Factors
(Rev. Rule 87-41 and DOL)
1. Level of instruction
– Direct when, where and how the work is done.
2. Amount of training
– Employees typically receive training
3. Degree of business integration
– Is there a continuing working relationship?
4. Extent of personal services
– Does the worker provide services personally?
5. Control of assistants
– who hires, supervises and pays assistants
www.agdglaw.com
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6. The 20 Common Law Factors (continued)
6. Continuity of relationships
– A continuous relationship usually means an employment relationship is
present
7. Flexibility of Schedules
– Independent contractors generally set their own hours
8. Demands for full-time work
– Full time generally suggests an employment relationship
9. Need for on-site services
– Work on the company's premises suggests an employment
10. Sequence of work
– If required to work in a certain order or sequence
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7. The 20 Common Law Factors (continued)
11. Requirement for reports
– Report his or her progress usually demonstrates an employment
relationship
12. Method of payment
– Paid hourly, weekly or monthly
13. Payment of business or travel expenses
– If travel and business expenses are reimbursed
14. Provision of tools and Services
– Provides tools and materials in order to perform their jobs?
15. Investment in facilities
– Independent contractors typically invest in and maintain their own work
facilities.
www.agdglaw.com
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8. The 20 Common Law Factors (continued)
16. Realization of profit or loss
– Employees receive a salary do not have the risk of a loss.
17. Work for multiple companies
– Contractors can be working for multiple companies at once.
18. Availability to public
– An independent contractor generally makes his or her services available to the
general public.
19. Control over discharge
– Contractor's termination usually depends on the contract terms.
20. Right of termination
– Employees can quit their job at any time without incurring a liability, whereas
independent contractors have contract terms.
www.agdglaw.com
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9. IRS Test
• The IRS looks at the degree of control the employer
exerts over the worker and the degree of
independence exhibited by the worker.
• The IRS considers facts that provide evidence in the
following three categories:
– Behavioral Control
– Financial Control
– Type of Relationship
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10. Behavioral Control
• Control over when and where the work will be done
• Whether or not the employer provides instruction
on how the work will be done
• Whether the worker uses the employer’s or his/her
own tools and equipment
• Whether or not the employer provides training to
the worker
• How the worker is evaluated (details or end result)
www.agdglaw.com
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11. Financial Control
• Extent of unreimbursed business expenses
• Extent of worker’s investment in equipment and
facilities
• Extent to which the worker’s services are made
available to the relevant market
• Extent to which the worker can realize a profit or
loss
• Method of payment
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12. Type of Relationship
• Whether or not the employer provides the worker with
employee-type benefits
– Insurance
– Pension plan
– Vacation, holiday, or sick pay
• Whether or not the worker is provided a copy of the employee
handbook
• Whether or not the worker is engaged with the expectation
that the relationship will continue indefinitely
• The extent to which the worker’s services are a key aspect of
the employer’s regular business
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13. United States Supreme Court
In resolving disputes under the Fair Labor Standards Act,
the United States Supreme Court [Rutherford Food Corp. vs.
McComb, 331 U.S.722 (1947)] has said that no single factor
is determinative, but depends upon the whole activity.
• The factors the Court has considered significant include:
– The extent to which the worker’s services are an integral
part of the employer’s business
– The permanency of the relationship
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14. The U.S. Supreme Court (continued)
• The amount of the worker’s investment in
facilities and equipment
• The nature and degree of control by the principal
• The worker’s opportunities for profit and loss
• The level of skill require in performing the job and
the amount of initiative, judgment, or foresight in
open market competition with others required for
the success of the claimed independent
enterprise
www.agdglaw.com
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15. Other Factors Supporting “Employee” Status
• Worker Receiving Benefits
• Company Equipment
– (computer, IPhone, e-mail address, etc.)
• Employee Directory
• Business Cards
www.agdglaw.com
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16. Other Factors Supporting “Employee” Status
• Job Descriptions
• Personnel Files
• Performance Evaluations
• Employee Handbooks
www.agdglaw.com
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17. New Jersey Unemployment Standards
• New Jersey uses a regulatory scheme for
unemployment contributions called the “ABC Test”:
– Freedom from employer control; and
– Service is outside normal course of business or performed
outside place of business; and
– Individual is engaged in independently established trade,
occupation or business.
www.agdglaw.com
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18. Test Under California’s Division of Labor
Standards Enforcement
S. G. Borello & Sons, Inc. v. Dept. of Industrial Relations
• Rebuttable presumption worker is an “employee”
• 11 Factors
– Whether the person performing services is engaged in an occupation or business distinct from
that of the principal;
– Whether or not the work is part of the regular business of the principal or alleged employer;
– Whether the principal or the worker supplies the instrumentalities, tools, and the place for the
person doing the work;
– The alleged employee’s investment in the equipment or materials required by his or her task or his
or her employment helpers;
– Whether the service rendered requires special skill;
– The kind of occupation, with reference to whether, in the locality, the work is usually done under
the direction of the principal or by a specialist without supervision;
– The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
– The length of time for which the services are to be performed;
– The degree of permanence of the working relationship;
– The method of payment, whether by time or by the job; and
– Whether or not the parties believe they are creating an employer-employee relationship may have
some bearing on the question, but is not determinative.
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20. A Straightforward Example – Part 1
• Painter Bob
– Bob advertises in the local newspaper to get jobs
– He maintains his own brushes, ladders, and drop
cloths, and buys his own paint
– He is paid by the job
– When the paint job is complete, Bob no longer
works for the customer/employer
Bob is an independent contractor
www.agdglaw.com
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22. A Straightforward Example – Part 2
• Painter John
– John reports to work at the same company every
day
– The company provides John with the paint,
brushes, ladders and other materials to do the
job
– The company sets John’s working hours
– John works for the company full time
John is an employee of the company
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24. A Little Murky
• Painter Paul
– Paul reports to work at the same company 3 or 4 days a
week. He works only 3-4 hours each evening.
– Paul advertises in the local newspaper to get additional
day jobs.
– The company provides Paul with the paint, brushes,
ladders and other materials to do the job.
– The company pays Paul by the hour and Paul has some
discretion on the days he works.
– Paul has worked for the company in this capacity for
several years.
www.agdglaw.com
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25. Rev. Rul. 57-79
vs.
Rev. Rul. 57-80
When is a schochet considered an
employee or an independent contractor?
www.agdglaw.com
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26. Are schochetim considered employees of
the slaughterhouse and packing plant?
Aurora Packing Co. vs. NLRB
904 F.2d 73 (D.C. Cir. 1990)
www.agdglaw.com
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27. Is a Mashgiach an employee
of a kosher caterer?
Altman vs. Sterling Caterers, Inc.
879 F.Supp.2d 1375 (S.D. Florida 2012)(FLSA)
www.agdglaw.com
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28. Section 530 Safe Harbor
• Independent contractors will not be reclassified as
employees if:
a) The company treats individuals with similar job
duties as independent contractors
b) The company filed all required information returns
(Forms 1099); and
c) The company had a reasonable basis for treating
the worker as an independent contractor
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29. IRS Voluntary Classification
Settlement Program
• Eligibility
– Are currently treating the workers as non-employees
– Have satisfied Form 1099 requirements for the
workers for the past 3 years
– Have no current dispute with the IRS or the DOL
regarding the workers’ status
– Have not been previously audited by the IRS or if so,
have complied with the results of the previous audit.
www.agdglaw.com
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30. IRS Voluntary Classification
Settlement Program
• Requirements
– Employer agrees to prospectively treat the workers as
employees in the future
– Employer agrees to extend the period of limitations
on assessment of employment taxes for 3 years
beginning after the date of the agreement
www.agdglaw.com
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31. IRS Voluntary Classification
Settlement Program
• Benefits
– Employer will pay 10% of employment tax liability
that may have been due on compensation paid to
workers for the most recent tax year
– No interest or penalties on the liability
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32. What May Trigger
An Inquiry or Audit?
• Worker Files For Unemployment
– Employer disputes eligibility, claiming worker is an
independent contractor
• Review of 1099-MISC filings (IRS data sharing)
• Change in Employee Status/Classification (from W-2
to 1099)
• Worker Complaint
www.agdglaw.com
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33. Avoiding Litigation
What can companies do?
• Review all written agreements with mashgichim;
• Make contracts results-oriented as opposed to setting open-ended terms;
• Provide the contractor with the right to set hours of work and schedules and
to determine what tools and materials to use;
• Do not restrict the contractor’s ability to work on other projects;
• Provide contractual requirements for:
– insurance;
– indemnification; and
– risk of loss.
• When possible contract with a corporation or company as opposed to an
individual;
• Do not compensate the contractor as an employee, i.e., weekly or bi-weekly
payments;
• Require the contractor to seek reimbursement for expenses.
www.agdglaw.com
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34. Disclaimer
This presentation is a summary and is not intended as tax or legal
advice. You should consult with your tax advisor to obtain specific
advice with respect to your fact pattern.
Based on the most recent "best practice" standards for tax
advisors issued by the Treasury Department, commonly referred
to as Circular 230, we wish to advise you that this presentation
has not been prepared to be used, and cannot be used, to
provide assurance that penalties which may be assessed by the
IRS or other taxing authority (including specifically section 6662
understatement penalties) will not be upheld.
www.agdglaw.com
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