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

[jk]

Foster_Foster;633365]

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

Do you know if the state law mirrors the application of the minimum wage standards exactly? OP is dealing with the state.

[Foster_Foster]

I don't think KY law is more restrictive than federal law in this regard, but state labor dept. folks will pursue unpaid overtime if KY law dictates this type of service worker doesn't fall under the (all too many) exemptions.

As it relates to federal employer-related taxes, I think the poster can count on the federal government sniffing around eventually (again, I'm curious to know how long this company has operated this way). I suspect the federal end will be far more $$$ pointy end of this as compared to KY.

[AJJ]

I was looking around a bit more to get more information on the kind of security company I am talking about, I was able to come up with this.

http://www.startasecuritycompany.com...-services.html

This would be set up just like our company would be from the way it looks.

Reasons to use sub-contractors in the security industry:

>> Reduces payroll tax liability (FICA, FUTA, Unemployment, Workers Comp etc.)
>> Reduces insurance costs that are based upon payroll figures
>> Reduces your company’s liability

Our sub-contractor agreement includes:

>> Services
>> Time of completion
>> Equipment
>> Payment
>> Expenses
>> Indemnification
>> General Provisions
>> Exhibit “A”

So after reading this, is it possible that this could be legal?

This also may be of interest. http://www.eagle-securityservices.co...subcontracting

Thanks again everyone for your help and input.

- - - Updated - - -

After more research I found another company based in Washington that is ran like this called securetransecurity.

A lot of other really good links that pertain to this subject.

http://www.lpsgroup.net/articles/Working_with_LP_Dept.pdf

http://www.pssca.com/page/subcontract-security-guards.html

http://www.themartinsgroup.com/Subcontracting.html

http://www.aaasecurityguard.com/subcontract-security-guards

So basically my point in posting these links is that a lot of other companies seem to be subcontracting guards as well and seem to be set up similar. I will contact a few of these in the morning to find out more details. But if they are run like this, what would be the problem with ours?

[jk]

nobody ever said you couldn't do what you want to do. All that was said was it is difficult to do and it not actually create an employer/employee relationship. That is why you need a consultant that knows the laws very well to guide you. That is something that a hands on person would be much more accurate than an internet aide.



btw: I haven't read any of the links but be aware, just because they say they are legit doesn't mean they are. They could be wrong in their business model as well.

[flyingron]

As JK says, you can contract out guards and subcontract out to other companies. However, the federal law is pretty clear. If you shop out bodies as individuals, YOU ARE THEIR EMPLOYEES.
Now if you act as sort of an employment agency where you line up independent contractors (for a fee) but the customer pays the contractors directly, you are probably safe. But if you take money from the cutovers and remit it to an employee, I can almost guarantee the IRS will determine you to be an employer.

[Foster_Foster]

I suggest you stop "looking around" on the internet, because it's only confusing you.

These folks are fairly evidently your employees from what you describe and they aren't self-employed. It's too bad they don't understand even the min. wage concept, let alone that at $6.50/hour, minus their 15.3% self-employment tax alone (normally the employer covers half), that'd bring their contract return down to $5.50/hour, never mind any applicable state-related tax (hopefully not much, if they haven't been paying any of this).

The notion that someone would work up to 80 hours a week (I think you mentioned) for at the outside a net $400 a week (let's say KY income tax is 6%) is ... mind-boggling. Why not just cut out your company as a middle man and offer their services directly to your client?

Tell your father to seek counsel.

[AJJ]

Okay, thank you all for your help. I do have one last question, what will happen if this turns into a big case? would my brother and I be held reliable since we also work for the company? ( I do not believe the company is in either of our names, it is in my dads and his wife to my knowledge )

Thanks.

[jk]

are you liable now for company debts? If not, there is no reason to assume you would be held liable for any company debts due to the issue at hand?

[AJJ]

Hello, first off thanks to everyone who replied to this and sorry for the bump. But I do have a few last questions.

As he is my father I did not make him sign any paperwork saying he owes me this much money and so on. But I got to thinking about it and about $2100 of the money I loaned him was from my paychecks. ( He didn't pay me once in December and I worked 12 hours a day except for 3 or 4 days that I was off. Plus he didn't pay me a paycheck for 1 weeks work in September for about 461 dollars. If I don't get any money back soon, I could bring this up if we do a civil suit and get my money back, right? What all would I need to prove it? since he didn't pay me, obviously I have no pay stubs from these weeks.

Also I'm curious, his company is an LLC which if I am correct protects your residence and a few other things? What all would the IRS or court go after to help recuperate money? They have 3 cars, 2 ATVs, a tractor, two motorcycles and a few other things of value. I am just trying to see what is protected and what isn't and if there is even a real need to worry about those things being taken. Also they would put a freeze on his bank account without warning correct? These are just things I have read and am trying to understand.

Would he be required to pay us the overtime and minimum wage stuff plus damages or could he file bankruptcy and get out of that?

Okay those are all my last questions... I'm just curious as to what I should be expecting within the next few months as this roller coaster takes flight. Right now me and my brother are the only ones who know anything about anything. I showed him this forum and he was shocked at first but then he was like whatever, who cares. The car he drives though is in my dads wife's name. So he better be getting that switched in his name if there is any danger of it being taken.

Thanks again guys.

[jk]

No reason to apologize. Nothing wrong with asking more questions, especially from a person that appears to be trying to understand the situation and not simply argue how right they are. So many posters simply want somebody to agree they are right, even when they aren't.


Operating an LLC often protects the members personal assets BUT, if a person acts improperly, it is not difficult to unintentionally remove those protections by commingling personal and LLC funds and assets. Whether your father has kept the business operations separate or not is something we cannot see from here. Often times, in smaller LLC's especially, when there are financial problems, the line is often crossed without thought of the consequences. That could be enough to remove the protections of the LLC since the result is; the LLC finances and the personal financial situation become one and the same rather than being two separate entities.

The car he drives though is in my dads wife's name. So he better be getting that switched in his name if there is any danger of it being taken.

realize that transferring assets out of your fathers name, very likely, will not protect the asset if the obvious intent is to hide those assets (and it is determined his personal assets are subject to claims by creditors). If it were that easy, everybody in fear of losing an asset would simply hand it over to some other party to protect it. While it often works against small creditors, the state and federal governments aren't so easily fooled.

as to your pay: obviously it is owed. It may be seen as you deferred your pay temporarily to assist in the finances of the company. Especially given your position in the situation, that is not unusual. That doesn't relieve the company from owing and hopefully eventually paying you. What it does is remove your claim from some intentional act to avoid paying an employee.

as to proof: actually the business has to prove it paid you once you make a wage claim, not the other way around.

Would he be required to pay us the overtime and minimum wage stuff plus damages or could he file bankruptcy and get out of that?

He or the LLC? Be cautious when speaking of your father in this situation and inferring there is no separation of the business and personal finances.

Right now me and my brother are the only ones who know anything about anything. I showed him this forum and he was shocked at first but then he was like whatever, who cares

what a shame. I would think he would care. After all, this is his father and his father's and his livelihood we are talking about. So much for family support and devotion.