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  1. #1

    Default Can a Client Offer Different Benefits Packages to Individuals vs. Business Entities

    My question involves independent contractors in the state of: FLORIDA



    Hello:

    I am a physician who is employed as an Independent Contractor for a large for-profit private medical group. I receive a 1099-MISC at year's end. My W-9 was completed with my S-corporation being the payee. My written Agreement, made between the company and I as an individual, provides for vacation time, sick days with pay, personal days with pay, and so forth. I am in the second year of a self-renewing contract. Bi-weekly compensation is made-out to my S-corporation. I am the sole employee of my S-corporation, which was established almost 13 years ago. I have heard through the grapevine that the employer has discussed the following with another existing physician Independent Contractor: if he decides to establish an S-corporation for tax purposes, the corporation will gladly pay his S-corporation instead of the physician, but the physician was told that he will relinquish 100% of his benefits (no vacation, sick days, personal days, and so forth).

    I am trying to find out if the company can offer employee-like benefits to its Independent Contractors, but withdraw them if compensation is made payable to the physician's S-corp. The company apparently is not being consistent since I enjoy these benefits as an IC, my written employment Agreement is entered into with me as an individual, and my W-9 has my S-corp as the payee.

    Thank you.

    Adam Stuart

  2. #2
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    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    Quote Quoting amstuart1964
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    I am trying to find out if the company can offer employee-like benefits to its Independent Contractors, but withdraw them if compensation is made payable to the physician's S-corp.
    Yes.

    It absolutely can, as there is no law prohibiting the practice.

    Quote Quoting amstuart1964
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    The company apparently is not being consistent since I enjoy these benefits as an IC, my written employment Agreement is entered into with me as an individual, and my W-9 has my S-corp as the payee.
    Then it's up to you to negotiate the contract the way you want it or seek employment elsewhere.

  3. #3

    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    Thank you for your response. The company is posturing, suggesting that the "law" prohibits an IC from enjoying the benefits of the company if the payee is the physician's S-corporation. Not to beat a dead horse, but my arrangement as described has allowed me full benefits, enjoyment of my S-corp, and payment made to my S-corp. The contract was negotiated 1.5 years ago and is self-renewing each year. I am not looking to renegotiate or seek employment elsewhere: I am interested in a legal opinion as to the veracity of the medical corporation's statement.

    Thank you.

  4. #4
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    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    I didn't do an exhaustive search, but I didn't spot any new legislation. Will they share the statute number or bill number for the enrolled act?

  5. #5
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    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    I am interested in a legal opinion as to the veracity of the medical corporation's statement.
    Are you referring to the following?

    I am trying to find out if the company can offer employee-like benefits to its Independent Contractors, but withdraw them if compensation is made payable to the physician's S-corp. The company apparently is not being consistent since I enjoy these benefits as an IC, my written employment Agreement is entered into with me as an individual, and my W-9 has my S-corp as the payee.
    If so, absolutely yes. They can treat contractors, whether they be an S corp or an individual, any way they choose.


    I would expect them to stop paying defined benefits as they are with you altogether. When a company starts paying an IC benefits that are typically reserved for employees, it starts to blur the line as to what they are; employee or IC.

    Even in your statement it suggests a problem:

    My written Agreement, made between the company and I as an individual, provides for vacation time, sick days with pay, personal days with pay, and so forth.


    If you have a signed agreement with the medical group, then why would they pay your S corp? They have no contract with your S corp. The benefits you list are also not typical of a the specifics of a labor contract relationship but more akin an employer/employee relationship. You even said that yourself: I am trying to find out if the company can offer employee-like benefits to its Independent Contractors

    It suggests a relationship too close to an employer/employee relationship rather than an IC relationship. That can cause the employer a lot of problems. Especially in the medical arena, liability issues can be very different in an IC v. employee relationship and regardless of what you want to call it, if some person suing can show it was an employee relationship rather than an IC, the medical group's exposure balloons.

    There are also huge differences in an employer's financial obligations in an employee situation that they escape in an IC situation. If your relationship should be proven by the IRS to be an employer/employee relationship, it could be very expensive for the medical group. Sometimes, even if a contract says it is not an employee/employer relationship, the actions prove different and that is what the IRS will use to make their determination.

    I wouldn't necessarily expect their position to be based on new law but a review of the current laws and the increasing pressure from the government, insurance companies, and all those involved to draw the lines of separation using a darker pencil.

  6. #6

    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    I am smiling as I read your question. This is a mega-million dollar corporation whose corporate officers routinely profess to know the law and medicine (not a single officer is licensed to practice either profession). My initial reaction is the company did not look closely enough when they entered into an employment agreement with me, offering the perks of an employee but paying me as an IC and making my checks out to my S-corp. Now corporate is trying to reduce their "costs" by suggesting to another IC physician that if he changes his pay-to status by forming an S-corp, he will lose his benefit package. As a privately held company, if there is no law prohibiting this practice in Florida, then corporate can do whatever they want to. If I am subsequently told that despite 1.5 years of a written agreement being in place, I, too, am going to lose my benefits, then I will ask for legal clarification as to the company's decision to withdraw my benefit package instead of maintaining the status quo and adhering to the Agreement. Thank you very much for your time.

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    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    Quote Quoting amstuart1964
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    The company is posturing, suggesting that the "law" prohibits an IC from enjoying the benefits of the company if the payee is the physician's S-corporation.
    Corporate "know nothings" often say it's the law for two reasons.

    1 - So they don't want to have to explain that they are screwing somebody.

    2 - So unsophisticated employees don't give them an argument.

    Quote Quoting amstuart1964
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    Not to beat a dead horse, but my arrangement as described has allowed me full benefits, enjoyment of my S-corp, and payment made to my S-corp.
    Without reading your entire contract all I can say is that if that's all true, then they will be in breach if they don't comply with it.

    Quote Quoting amstuart1964
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    I am not looking to renegotiate or seek employment elsewhere:
    Then you might end up having to litigate against your employer if your employer breaches the contract.

    Quote Quoting amstuart1964
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    I am interested in a legal opinion as to the veracity of the medical corporation's statement.
    Ask whoever said "it's the law" to provide you with a statute number that we can all look up and read.

    If they don't provide it, take your contract to an attorney and have the attorney send them a written explanation of their contractual obligations.

  8. #8

    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    Absolutely true across your entire thread. I appreciate your assistance. Have a great day.

    Adam

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    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    I overlooked the following statement.

    Quote Quoting amstuart1964
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    Now corporate is trying to reduce their "costs" by suggesting to another IC physician that if he changes his pay-to status by forming an S-corp, he will lose his benefit package.
    The corporation can make that limitation going forward for an employee who does not yet have an S-Corp.

    When the person forms the S-Corp and asks that he be paid through his S-Corp he will, in essence, be asking for a modification of his existing contract, which will give the corporation the opportunity to modify the terms of the contract in their favor.

    It'll go like this:

    "OK, will change your contract so that we pay your S-Corp and you'll no longer have the employee benefits going forward. Accept that or we just continue to pay you and not your S-Corp."

    See how that works?

    There is no law preventing that type of negotiation or practice.

    In your case, you already have a contract that specifies your benefits AND that your S-Corp be paid. Were they to approach you with the change, they would be in breach unless there was something in your "self-renewing" contract that addresses termination of the contract which would then give them the leverage to change it at renewal.

  10. #10

    Default Re: Can a Client Offer Different Benefits Packages to Individuals vs. Business Entiti

    Yes, I understand your explanation going forward for the second employee. I was careful enough to draft my original Agreement such that "self-renewing" also retains all of the language, terms and conditions of the original. I <think> Human Resources signed-off, in addition to a corporate officer, on the original. When a contract is not boiler plate, their loss for not being careful...

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