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  1. #1
    Join Date
    Aug 2009
    Posts
    112

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

    My question involves business law in the state of: Kentucky

    We own a security company and we are contract labor because we could not afford to be anything other than contract labor, if we had to pay regular minimum wage with all the other fees involved we wouldn't be able to make it. Plus the men would only be able to work 40 hours a week.

    Basically, a year and a half ago one guy brought his family to camp over the weekend on one of the job sites, and this was definitely not allowed, we almost lost the contract we had, but we had to let the guy go. He reported us to the State of Kentucky, and now they're saying we might not be able to do contract labor anymore with our guards. Right now we pay below minimum wage at $6.50 an hour but the guards usually get between 55-80 hours a week so they bring home good money. We don't charge the people much over that, so our profit is not much.

    My question is, can the government force us to change to paying minimum wage and having to do W-2s and work mens comp etc or can we continue like we are doing paying $6.50 an hour and keep our men as contract laborers? This has really worried the whole family and men the last few weeks. We would just like to have this resolved.

    We had a judge and accountant set up the company the way it is now to make it legal, and they're not even sure what is going on. Is there anywhere in the law that states that we're safe in what we're doing? thanks

  2. #2
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    No, quite frankly, there isn't. Not if the men do not qualify as independent contractors. Because what you're dealing with is Federal law.

    There is a legal distinction between IC's and employees, and legal definitions of both. There are no options other than IC or employee; all workers in the US are either one or the other. Employee (w-2 at the end of the year) is the default. You can always classify a worker as an employee.

    The reverse is not true. If the worker does not qualify as an IC, you cannot legally classify them as such. While you have not provided much information, what little you have provided indicates that your workers do not qualify as IC's. If they do not meet the legal definition of IC's, then what you are doing is not legal and nothing but paying minimum wage/overtime, unemployment, workers comp and following all the wage and hour, discrimination, and other employment laws, will change that.

    A judge and an accountant do not necessarily know employment law.

  3. #3
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    more than likely you have employees.


    If you cannot afford to pay your employees at least minimum wage, you are not charging enough for your services. Your poor business acumen is not justification to pay your employees less than legally allowed.

  4. #4
    Join Date
    Aug 2009
    Posts
    112

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    What kind of information do you need to prove if we qualify as IC's or not?

    We are sub-contractor's we get a contract through a company, for example a mall wants to hire us, we sign a contract with a mall then we sign a contract with the men to work the mall. If the mall pays us $8.25 an hour, we pay the men $6.50. We do not provide shoes, or weapons, all men are to provide their own shoes and weapons. We provide the uniform and we're a licensed and bonded company and have been for 7 years without any problems until this incident.

    Is there any other kind of information that I need to disclose or is this enough to find out if we qualify for IC's.

    Also, the people out in Frankfort said they were going to call our guards to see if they feel they are being treated fairly. I don't know much about that, but that is what my lawyer told me.

    - - - Updated - - -

    @jk

    I am the son of the owner, so that attack doesn't mean anything for me. Also this is a poverty stricken area, no one is willing to pay for security around here. It's Kentucky.

    Please read my above post and please give me more information on if we qualify to be IC's

  5. #5
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    I am the son of the owner, so that attack doesn't mean anything for me. Also this is a poverty stricken area, no one is willing to pay for security around here. It's Kentucky.

    Please read my above post and please give me more information on if we qualify to be IC'
    All I read is how you can't afford to pay people anymore than you do which is possibly less than what is required. That is a real problem with some people that run businesses. The fact is, if you cannot afford to pay them what you are legally required to be paid, you are not charging enough for your services. If you cannot charge enough to cover what you are legally required to pay because customers won't pay enough to cover that, sorry to say but the business just isn't going to work. That is the simple reality of business.


    Also, the people out in Frankfort said they were going to call our guards to see if they feel they are being treated fairly.
    they don't care of you treated them fairly, just legally. They will ask them what they do, what control they have over themselves, what they are risking, financially, by taking on the contract and a few other questions.


    check out the following links. It will help describe how to determine the difference.



    http://www.irs.gov/pub/irs-pdf/p1779.pdf

    http://www.irs.gov/businesses/small/...99921,00.html/

    http://www.sba.gov/content/independe...s-vs-employees

  6. #6
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    Who controls what your employees do? You or them?

    Who provides the tools they need? You or them?

    Do they provide the same services they provide to you, to other employers as well?

  7. #7
    Join Date
    Aug 2009
    Posts
    112

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    CBG -

    Who controls them? - We tell them what time they have to be at work, and they can do what they want at work, they are free to eat and do what they want while they're on the job site.

    Who provides the tools they need? - We provide uniforms, they provide everything else. ( Guns, shoes, internet, computers, fans, etc )

    They are free to work for any other company they like to, they are not tied down to us. But most of our guards just work for us and no one else.

    Now with all this being said above - I am sure some of it doesn't apply for being an IC... Is there any changes we could make to turn into an IC company? and what would need to be changed? thanks

  8. #8
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    You need to talk to an EMPLOYMENT ATTORNEY. There isn't really a bright line for employee vs. IC - it's a preponderance of evidence. I very strongly suspect that you've got employees and not contractors. If they're working 55 to 80 hours a week, they don't really have much opportunity to work for other employers. You don't direct their work at all? You tell them what time to come in and who decides on their job duties?

  9. #9
    Join Date
    Aug 2009
    Posts
    112

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    Their only job duty is to make sure nothing gets stolen, so I mean, they really don't have to do anything they don't want to. They're not required to check locks or doors if they don't want. Of course the guys usually do, but it's not a requirement, we don't require them to do anything just to make sure nothing gets stolen. We do tell them what time to come in.

    - - - Updated - - -

    Oh, by the way we only have 5 full time employees and 4 part time. To give you an idea of how big/small we are.

  10. #10
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Contract Labor Issues Will We Have to Convert to W-2's

    Do you control what time they leave?

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