Becoming an Independent Contractor

[Agent]

My question involves business law in the state of: MN.
I would like to become an independent agent for the travel agency I currently work for. I have an opportunity for considerable new business and want to capture a portion of that for myself. My question is, can I reasonably expect my employer to continue to pay me my existing salary in addition to a percentage of the new business sales? If so would that make me an independent contractor? What is the best way for me to handle this and maintain my existing salary while I build my sales and transition to commission only or independent status?

[ArmyRetCW3]

Here is the federal labor rules on the subject of Independent Contractor. The IRS have their own rules as far as taxes is concern, see IRS for SS8.

http://www.dol.gov/esa/whd/regs/compliance/whdfs13.pdf

Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA)

This fact sheet provides general information concerning the meaning of "employment relationship" and the significance of that determination in applying provisions of the FLSA.

Characteristics

An employment relationship under the FLSA must be distinguished from a strictly contractual one. Such a relationship must exist for any provision of the FLSA to apply to any person engaged in work which may otherwise be subject to the Act. In the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves. The employer-employee relationship under the FLSA is tested by "economic reality" rather than "technical concepts." It is not determined by the common law standards relating to master and servant.

The U.S. Supreme Court has on a number of occasions indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. The Court has held that it is the total activity or situation which controls. Among the factors which the Court has considered significant are:

1) The extent to which the services rendered are an integral part of the principal's business.
2) The permanency of the relationship.
3) The amount of the alleged contractor's investment in facilities and equipment.
4) The nature and degree of control by the principal.
5) The alleged contractor's opportunities for profit and loss.
6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7) The degree of independent business organization and operation.

There are certain factors which are immaterial in determining whether there is an employment relationship. Such facts as the place where work is performed, the absence of a formal employment agreement, or whether an alleged independent contractor is licensed by State/local government are not considered to have a bearing on determinations as to whether there is an employment relationship. Additionally, the Supreme Court has held that the time or mode of pay does not control the determination of employee status.
Requirements

When it has been determined that an employer-employee relationship does exist, and the employee is engaged in work that is subject to the Act, it is required that the employee be paid at least the Federal minimum wage of $6.55 per hour effective July 24, 2008, and $7.25 per hour effective July 24, 2009, and in most cases overtime at time and one-half his/her regular rate of pay for all hours worked in excess of 40 per week. The Act also has
youth employment provisions which regulate the employment of minors under the age of eighteen, as well as recordkeeping requirements.

Typical Problems
(1) One of the most common problems is in the construction industry where contractors hire so-called independent contractors, who in reality should be considered employees because they do not meet the tests for independence, as stated above.
(2) Franchise arrangements can pose problems in this area as well. Depending on the level of control the franchisor has over the franchisee, employees of the latter may be considered to be employed by the franchisor.
(3) A situation involving a person volunteering his or her services for another may also result in an employment relationship. For example, a person who is an employee cannot "volunteer" his/her services to the employer to perform the same type service performed as an employee. Of course, individuals may volunteer or donate their services to religious, public service, and non-profit organizations, without contemplation of pay, and not be considered employees of such organization.
(4) Trainees or students may also be employees, depending on the circumstances of their activities for the employer.
(5) People who perform work at their own home are often improperly considered as independent contractors. The Act covers such homeworkers as employees and they are entitled to all benefits of the law.

[Mr. Knowitall]

That was completely non-responsive to the question; but the answer to the question is "no". If you wish to become an independent agent - a true independent contractor - you will no longer be an employee and will no longer receive a salary.

You may be able to negotiate some form of draw, recovered by the company when you earn fees or commissions, although I'm not aware of that practice being followed in the travel industry.

You could ask your employer about working part-time as an employee while you build your own business as an independent contractor, which (if you can work it out) would preserve part of your income; but that could complicate your status as an independent contractor, and if I were your employer I wouldn't go for it.

[Agent]

Thank you for your reply, it really does help me get some direction. Am rethinking my plan and will most likely post more questions in other forums to get more info.

[ArmyRetCW3]

My apologies for the non response. However those are the rules followed by the US Labor Dept-Wage Hour Div, when and if the so called IC comes wanting any back wages when the main employer/contractor fails to pay the supposedly agreed wages. By the way item #1 (among other things) would prevent the poster from working as a contractor. But if you are not familiar with these fact sheet and it’s implementation, I can understand.