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  1. #1
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    Default Does Worker Misclassification Void the Entire Indepedent Contractor Agreement

    My question involves independent contractors in the state of: Texas, working with a company based in Florida.

    All -

    First post here, so thank you in advance for your help. I have searched for 2 days and have not found a good answer for my situation, so I'm posting.

    I for sure am misclassified as an independent contractor for the business I work for, that is easy and I intend on filing the SS-8 document. Its already filled out. I'm waiting for an attorney's response today regarding some of the terms of the actual consulting agreement. I would assume that because the agreement is so heavily dependent on me being independent and having certain common luxuries of me being independent, which are now restricted through this agreement, that there is some sort of laws violated.

    My goal is get a new consulting agreement, as mine is continuously restrictive and down-right shameful that I even signed it. If the IRS finds that I should be an employee (they, no doubt in my mind, will), does that invalidate the entire Consulting Agreement, because it is unlawful? I'm happy to continue a W2 employment with common law rights such as At-Will, but right now, I feel like an indentured servant with no options and locked in this misery for the next 3 years and then some.

    For instance, some of the terms:
    • Company can terminate me if I do something stupid, but I can't quit at all. I'm locked in. This thing has been active for 6 years and auto-renews for another 3.
    • The address for me is incorrect, and reflects me being in Oklahoma and an Oklahoma entity, but I live and operate the business in Texas
    • Contract will end if I die, if the company folds, or a material breach unrectified within 30 days.
    • Material breach is defined for the Company, in that the only thing that triggers a material breach from their perspective is not paying me or reimbursing my expenses. However, I can breach the agreement 20 different ways.
    • An Exhibit is supposed to list my job responsibilities and duties. Exhibit Page says (Attached), but nothing is attached. I don't have a clear understanding of the job. It is whatever the boss says it is that day.
    • I am supposed to be provided direction and a budget for expenses, but have neither. I just do the work that is asked of me or handle customers phone calls and emails every day with my company email address
    • I am supposed to have an Annual Review every year, but have only had one once. Does any of this get the company in trouble?
    • I am forced to carry my own health insurance policy, and businss liability insurance. What happens if I don't?
    • Agreement says I shall be treated as an independent contractor no matter what, and am not entitled to any benefits. However, separately, and not listed in the ICA, I have an available bonus program made available to employees of the company
    • I am not allowed to work for anyone else whether it relates directly or indirectly to the Business, even though I operate and independent consulting firm. I am the business. This means I can't consult or work for anyone with any of the relevant skill sets that I have.
    • Everything I do, everything I come up with, hear about, or conceive, for my business, belongs to the Company. They can elect whether they want to take it or not, but don't have to respond if they want to put stuff in limbo.
    • I'm not allowed to talk about this agreement with anyone other than the law-firm of the Company that prepared the documents, and the Company itself. I believe I get Attorney Client Privilege by Law, but, apparently the document says I shouldn't do that.
    • I have an ongoing NDA for 2 years beyond the conclusion of this agreement, limited to the geographical places I work, which are listed, but also says the list is evolutionary and may change with time. Does this include every state I have worked in or traveled to, or just my primary locations I visit?
    • The Company can assign this agreement to an entity so long as I agree
    • Severability Clause
    • Counterparts Clause
    • Waiver of Breach Clause
    • Arbitration location Clause - Florida
    • Counterparts Clause

  2. #2
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Did you go into this agreement with your eyes open? You signed it didn't you? What has changed since you agreed to be an independent contractor?

    Now you are saying that you are misclassified. You signed the agreement. This is no surprise to you that you were not hired as an employee. Where the question comes into play is when someone is employed and then is classified as an independent contractor. Maybe you didn't understand what it meant to work as an IC. It meant no bennies, no insurance, no workman's comp, no paid lunch, no vacation pay or personal days. You pay your own taxes (estimated Federal and both sides of SS).

    You say you are a consultant so you are an IC.

    The minute the company finds out that you filed SS-8, you will be terminated.

  3. #3
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting budwad
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    Did you go into this agreement with your eyes open? You signed it didn't you? What has changed since you agreed to be an independent contractor?

    Now you are saying that you are misclassified. You signed the agreement. This is no surprise to you that you were not hired as an employee. Where the question comes into play is when someone is employed and then is classified as an independent contractor. Maybe you didn't understand what it meant to work as an IC. It meant no bennies, no insurance, no workman's comp, no paid lunch, no vacation pay or personal days. You pay your own taxes (estimated Federal and both sides of SS).

    You say you are a consultant so you are an IC.

    The minute the company finds out that you filed SS-8, you will be terminated.
    i'm ok with being terminated. Calm down budwad. I'm not upset about being classified as an IC or an employee, other than, you know, obeying the laws.

    The question is, the IRS and the SS-8, because of the forced employment status change, would that eliminate the contract and be a material breach or not. I was thrown a bunch of cash right after signing this deal when I was a kid, so yeah, I was new to the world of legal and contracts.

    EDIT: per the contracting agreement, and the laws of IRS, I am not treated or allowed the freedoms of a contractor or consultant. The entire world I work in thinks I'm a legit employee as I'm tied to this company. its like the agreement was crafted to prevent taxes, limit me in a near exclusive, but treat me as an employee with no at-will rights.

  4. #4
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    At-will only means that an employer can terminate you for any reason that is not protected by discrimination laws.

    You may have been young and stupid when you signed but there is no material breach (that I see). Isn't there a termination clause in the agreement? If you are unhappy with the situation, then give notice of your intent to terminate. You're not going to get a more advantageous agreement and remain an IC. You can always ask if they will hire you as an employee.

    Understand that when a company hires you (an independent company) to do work and you (your company) signs an agreement (contract) to do that work, you are not an employee.

  5. #5
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting budwad
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    At-will only means that an employer can terminate you for any reason that is not protected by discrimination laws.

    You may have been young and stupid when you signed but there is no material breach (that I see). Isn't there a termination clause in the agreement? If you are unhappy with the situation, then give notice of your intent to terminate. You're not going to get a more advantageous agreement and remain an IC. You can always ask if they will hire you as an employee.

    Understand that when a company hires you (an independent company) to do work and you (your company) signs an agreement (contract) to do that work, you are not an employee.
    I understand I am not an employee. I'm not upset about not being an employee. The IRS misclassification idea is really an idea to leverage that the ICA is void.

    No, there is no termination clause. I'm locked in with no out unless they want me out. Per my attorney call a few minutes ago, it sounds like the best idea is to voice an intent to terminate, assist with a backfill/replacement of me, so it eases the pain and there is less harm to the company. That way, a Breach of Contract lawsuit will have less impact or grounds since I was a nice guy. Perhaps this route could also just lead to a renegotiation of a contract which isn't so pitiful.

  6. #6
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting tennispro728
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    I understand I am not an employee. I'm not upset about not being an employee. The IRS misclassification idea is really an idea to leverage that the ICA is void.

    No, there is no termination clause. I'm locked in with no out unless they want me out. Per my attorney call a few minutes ago, it sounds like the best idea is to voice an intent to terminate, assist with a backfill/replacement of me, so it eases the pain and there is less harm to the company. That way, a Breach of Contract lawsuit will have less impact or grounds since I was a nice guy. Perhaps this route could also just lead to a renegotiation of a contract which isn't so pitiful.
    I am a little surprised that your attorney is saying that, because we do not have slavery in the US therefore any contract that gives a person no way out would be contrary to the law, and therefore that part of the contract would be void. That doesn't automatically make the rest of it void, but there are definitely some things in that contract that seem unenforceable.

    You can certainly cooperate with them getting someone to replace you, but I would not actively assist in doing so. You do not want to be responsible for someone else signing that same contract.

    I would also send in that SS-8. Bud is wrong that the fact that you signed a contract matters. Many misclassified people have signed contracts.

  7. #7
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting llworking
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    I am a little surprised that your attorney is saying that, because we do not have slavery in the US therefore any contract that gives a person no way out would be contrary to the law, and therefore that part of the contract would be void.
    Although it becomes a bit more complicated when the contract requires work by a specific person, in broad terms an independent contractor agreement is a business-to-business contract, not a contract of employment. It is possible for a business to contract to provide goods or services over a defined time frame, with no contractual grounds giving the vendor any right to early termination (which is not to say that suspension of services or termination could not occur as a result of a material breach by the client).

    When the contract for an independent contractor is specific to the individual, as might occur with a physician who comes into a practice as an independent contractor, there may be a basis to pursue the independent contractor for breach of contract if the contractor quits during the term of the contract without providing reasonable opportunity to find and hire a replacement. For routine services there may be a similar basis to seek compensation for an interruption in service from a contractor's sudden resignation, but absent unusual circumstances it should not take long for the customer to mitigate any damages by hiring a replacement.

    I'm going to make a wild inference based upon username that we are talking about a contract for a tennis pro, perhaps at a vacation community or tennis club. If the club hires prominent, retired tennis stars to act as its professionals, it would have a stronger case for arguing that the sudden departure of a pro would cause it economic harm. But short of that, with no disrespect intended to tennis pros, it should not be difficult to find a highly qualified tennis pro to assume the job. When you drop below the "brand name" level, pretty much any professional becomes somewhat fungible in the marketplace.

    To put it another way, anybody can quit, but sometimes quitting will create a cause of action for damages.

    If the client is willing to negotiate a new contract -- either a contract of employment, or a valid contract for an independent contractor -- everything is potentially up for negotiation.

  8. #8
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting Mr. Knowitall
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    Although it becomes a bit more complicated when the contract requires work by a specific person, in broad terms an independent contractor agreement is a business-to-business contract, not a contract of employment. It is possible for a business to contract to provide goods or services over a defined time frame, with no contractual grounds giving the vendor any right to early termination (which is not to say that suspension of services or termination could not occur as a result of a material breach by the client).

    When the contract for an independent contractor is specific to the individual, as might occur with a physician who comes into a practice as an independent contractor, there may be a basis to pursue the independent contractor for breach of contract if the contractor quits during the term of the contract without providing reasonable opportunity to find and hire a replacement. For routine services there may be a similar basis to seek compensation for an interruption in service from a contractor's sudden resignation, but absent unusual circumstances it should not take long for the customer to mitigate any damages by hiring a replacement.

    I'm going to make a wild inference based upon username that we are talking about a contract for a tennis pro, perhaps at a vacation community or tennis club. If the club hires prominent, retired tennis stars to act as its professionals, it would have a stronger case for arguing that the sudden departure of a pro would cause it economic harm. But short of that, with no disrespect intended to tennis pros, it should not be difficult to find a highly qualified tennis pro to assume the job. When you drop below the "brand name" level, pretty much any professional becomes somewhat fungible in the marketplace.

    To put it another way, anybody can quit, but sometimes quitting will create a cause of action for damages.

    If the client is willing to negotiate a new contract -- either a contract of employment, or a valid contract for an independent contractor -- everything is potentially up for negotiation.
    I do not disagree in theory with what you are saying, but it does appear that OP's contract leaves him no option to terminate at all. It appears to auto renew for 3 years at a time with the OP having no option to not renew.

  9. #9
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting Mr. Knowitall
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    Although it becomes a bit more complicated when the contract requires work by a specific person, in broad terms an independent contractor agreement is a business-to-business contract, not a contract of employment. It is possible for a business to contract to provide goods or services over a defined time frame, with no contractual grounds giving the vendor any right to early termination (which is not to say that suspension of services or termination could not occur as a result of a material breach by the client).

    When the contract for an independent contractor is specific to the individual, as might occur with a physician who comes into a practice as an independent contractor, there may be a basis to pursue the independent contractor for breach of contract if the contractor quits during the term of the contract without providing reasonable opportunity to find and hire a replacement. For routine services there may be a similar basis to seek compensation for an interruption in service from a contractor's sudden resignation, but absent unusual circumstances it should not take long for the customer to mitigate any damages by hiring a replacement.

    I'm going to make a wild inference based upon username that we are talking about a contract for a tennis pro, perhaps at a vacation community or tennis club. If the club hires prominent, retired tennis stars to act as its professionals, it would have a stronger case for arguing that the sudden departure of a pro would cause it economic harm. But short of that, with no disrespect intended to tennis pros, it should not be difficult to find a highly qualified tennis pro to assume the job. When you drop below the "brand name" level, pretty much any professional becomes somewhat fungible in the marketplace.

    To put it another way, anybody can quit, but sometimes quitting will create a cause of action for damages.

    If the client is willing to negotiate a new contract -- either a contract of employment, or a valid contract for an independent contractor -- everything is potentially up for negotiation.
    Although my handle on the website is 'tennispro', this has nothing to do with Tennis. I didn't want to link my usual usernames from other forums and accounts to this, so I shielded it and came up with something random. The employment was part of the terms of an intellectual property transfer and license agreement, along with earning equity of a company. I develop products and do engineering, FEA, etc, a bunch of nerd stuff. I don't like to brag, but in the last 5 years the company I'm contracted with (and should be a W2 employee), has flipped our section of industry on its head. I am the company go to leader for engineering and products, where as the President is the go to guy on business contracts, relationships, etc. Though, often, the real relationship dies after people read his versions of NDAs or cooperative agreements.

    Quote Quoting llworking
    View Post
    I am a little surprised that your attorney is saying that, because we do not have slavery in the US therefore any contract that gives a person no way out would be contrary to the law, and therefore that part of the contract would be void. That doesn't automatically make the rest of it void, but there are definitely some things in that contract that seem unenforceable.

    You can certainly cooperate with them getting someone to replace you, but I would not actively assist in doing so. You do not want to be responsible for someone else signing that same contract.

    I would also send in that SS-8. Bud is wrong that the fact that you signed a contract matters. Many misclassified people have signed contracts.
    I feel like a slave, tied into a box with no way to move or do anything. I'm happy to post this thing with a bunch of redaction or blacked out sections, no issues. I really want to understand what rights as humans we have, regardless if we signed a contract or not that limits those rights. All employees that come to the company are brought on as W2, only I am a contractor. Other employees also aren't subject to the same terms and conditions as me. I'm sort of special to the company and highly valued, so, that's the reason for not allowing me to walk. At this point I'm just asking questions and getting feelers on advice of direction, if I choose to do something. I probably will do the SS-8. Keep in mind I learned the temper of the President when he got caught for using $20k in counterfeit software. We were forced to buy legitimate licenses. This was about 2 months after I questioned him on the practice. The company makes plenty of money, but to him software is a waste of funds and unnecessary.

    EDIT: actually, any spending that doesn't provide a greater return on the investment, is dead. For instance. I have an idea, I want to pursue it for the company. If he's not convinced, he won't spend any money on it. So I will, to vet it out, its in my nature. Say, 6 months later that idea is vetted. I fronted all the money to develop it. He would still come back and say it belongs to the company, even though I paid for everything. I take on the risk of vetting things, and he takes it back. I won't ever get a document or agreement from him on ideas that I pitch, he declines, and I'm free to then pursue, 100%, and I own them, because the company wasn't interested in funding the R&D. Nope, will never happen. Instead, I take on the risk, if it becomes something, I get paid back. If it becomes nothing, I lost my personal money.

    Quote Quoting llworking
    View Post
    I do not disagree in theory with what you are saying, but it does appear that OP's contract leaves him no option to terminate at all. It appears to auto renew for 3 years at a time with the OP having no option to not renew.
    Should I send this to you? I don't know the conditions or rules of this forum, so slap my wrist if I'm proposing foul play. I'm not that kind of person.

  10. #10
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    Default Re: Misclassification Void Entire Indepedent Contractor Agreement

    Quote Quoting llworking
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    I do not disagree in theory with what you are saying, but it does appear that OP's contract leaves him no option to terminate at all. It appears to auto renew for 3 years at a time with the OP having no option to not renew.
    That doesn’t make it slavery; a court will not compel specific performance to force a particular person to work the contract. A party always may terminate their contracts. Indeed, there is the notion of efficient breach. The issue here is not whether he can terminate the contract and stop working there. The issue is what, if any damages, might he owe the employer for doing that. As Mr. Knowitall suggests, the employer might be hard pressed to argue that it suffered significant damages from it.

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