Can You Be Required to Treat Contract Laborers as W-2 Employees

[jk]

what happens if they want to leave in the middle of a shift? Can they just leave? Can they have somebody they choose (somebody you may not have ever met) take their place? Do you make a schedule for the guys? Do you ever tell anybody they have to work some given day or time? What if three guys decided they wanted to swap their shifts; would they have to have your permission?

I really believe you are attempting to minimize your claimed control over the guys. It doesn't matter here other than you won't get as accurate answer as might be able to be given.

[AJJ]

I see where this is going, and it will qualify us as employers I suspect, but yes we have schedules. So if we do have schedules that would qualify us as employers, correct? but is there anyway around that? can we get rid of the schedules and just have men come in and replace each other whenever they're ready? and as far as supplying things, what all does a sub contractor provide? also they provide their own vehicles and cell phones. Thanks.

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@jk I see your point on that one

"What if three guys decided they wanted to swap their shifts; would they have to have your permission?"

On a normal basis, yes they would. But see this is what I am trying to do at this point, I am trying to break away from being an employer and more of a IC.

Also I just found out that one of the guys that set up the company worked for the IRS for 7 years. So he should have known his stuff.

[cbg]

We're not the ones you have to convince. It is very, very easy to have employees; it's very, very difficult to have nothing but IC's. I'm willing to take your word for it but I'm not the ones who will have to pay the fines and change my whole structure if I'm wrong. You may be right but if you are, it's sheer luck.

So get thee to an employment attorney, PRONTO. If it turns out that jk and I are right and you have employees, the Feds will be much more forgiving if you've taken steps to make corrections than if you have not. And if it turns out that you're right and we're wrong, you haven't lost anything but a consultation fee.

[AJJ]

Well my dad is definitely cracking under the pressure, he's talking about just selling the company ( the security license ) if you guys are right and packing up. I told him some of the things you and JK said and he didn't want to hear it. He just said so everyone in the world then is an employee and they make 50 bucks an hour. Eh, this is total craziness, I know my dad is upset. I am also sad to be losing this job, had it for almost 2 years, ever since I was 20. But this is why I came here to find out more details. I wanted to find out if there was another way we can structure the company to make it more like an IC than an employee based company.

Also I am still really confused on what an IC furnishes and what employers furnish? I haven't gotten that part cleared. And what kind of fees are there for running a company like an IC when it was supposed to be an employee based company any idea? ( and who would be responsible for the fees? him or the people that set his company up? )

[jk]

.

Also I am still really confused on what an IC furnishes and what employers furnish? )

you and most everybody else. That is part of the problem; it is difficult to determine this one way or the other definitively. There are no clear cut rules and in the end, we depend on a government entity to make the call.

Since this is in the hands of the state already, there is nothing you can do to change what was. As CBG said, you can be proactive and get a hands on opinion of a person skilled in this area. If they are employees, it won't change what will be owed for the past but it may prevent some penalties. It will also help you to structure your company as you would like.

[AJJ]

This was not the news I wanted to hear. I will have to wait to see what the final decision is. But from the looks of it I am out of a job. I really loved this job. but there are more things ahead for me, I guess I can get into real estate and maybe buy a duplex/triplex or something and move out of here.

But hey, jk and cbg, I want to thank you both for your time! you both have been more than helpful! Thanks again and I really do appreciate it. You guys rock. I joined this forum a few years ago, and glad I did. I remember you from before jk, you helped me last time too.

[jk]

AJJ;633195]This was not the news I wanted to hear. I will have to wait to see what the final decision is. But from the looks of it I am out of a job. I really loved this job. but there are more things ahead for me, I guess I can get into real estate and maybe buy a duplex/triplex or something and move out of here.

You, or dad actually, will have to ride this out. Since this has been reported for investigation, closing the doors won't stop that. If you want this to work, seriously, take CBG's advice to see if you can make this company operate as you were intending. As CBG stated, it can be difficult but that doesn't mean impossible necessarily. Find a lawyer locally that can advise you and see if you can make it work.

But hey, jk and cbg, I want to thank you both for your time! you both have been more than helpful! Thanks again and I really do appreciate it. You guys rock. I joined this forum a few years ago, and glad I did. I remember you from before jk, you helped me last time too.

thanks. I try.

[cbg]

You know, even if we're right and everyone is an employee, legally you only have to pay them the higher of state or Federal minimum wage, and OT if they work over 40 hours a week. YOU, not the employee, decides if they work over 40 hours a week. You NEVER are required under the law to allow them to work overtime. You are required to pay them if they work it, but you don't have to allow them to work it, and if they work it unauthorized you can discipline them (though you still have to pay). Just because they're employees doesn't mean you need to pay $50 an hour. I'm an employee and I sure don't get $50 an hour.

[Foster_Foster]

Oh dear. First off, it is the individual that would be either an "independent contractor" (his own business person) or an employee. The company is not an "IC". Nothing you've said indicates these folks are contractors vs. employees, I'm afraid.

The irony is that your company isn't likely even subject to FLSA as it relates to overtime pay:
http://www.dol.gov/compliance/guide/minwage.htm

Obviously, I can't know what you mean about that comment about "getting" a "judge" and an accountant to set up the company so that you could "be an IC" (or whatever that comment was). This has nothing to do with the corporate structure of your company but misclassification of workers, and an accountant is not an attorney at any rate, so ...

It sounds like your father made some very odd and possibly quite expensive and illegal mistakes for the sake of some very weird presumptions, over relatively little money in the scheme of things. (The hyperbolic/histrionic comments about doing it the "legal" way meaning the cost of these workers would have been $50/hour is obviously silly/juvenile nonsense.)

I would tell your father to immediately seek local business/corporate counsel for employer-related issues. You don't say how long this company has been in business or how long your father has been doing this, but even if the feds don't wind up coming after him (I'm willing to bet the state will have a reciprocal reporting arrangement with the IRS), this could become extremely costly.

[cbg]

Foster, what am I missing? What makes you think the company is not subject to the FLSA?

Even if the company doesn't gross $500,00 a year, the definition of "interstate commerce" has been interpreted so broadly by the courts that it is next to impossible for any employer to meet that criteria for exemption.