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  1. #11
    Join Date
    May 2018
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    5

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    Quote Quoting PayrolGuy
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    To the OP. What is your goal in this/these worker(s) being ICs instead of employees? You need to think of the goal instead of the process.
    Quote Quoting llworking
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    I suspect that the goal is what the goal is for everyone who prefers to have contractors rather than employees: To save money, time and hassle.
    Quote Quoting PayrolGuy
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    I know that but from time to time there is another reason. And since the OP put so much work in the post it would be nice to know if that is the case with him.
    So the first thing that I will say is that right now we are not doing most of the things I mentioned. The only thing we are doing right now is the phone thing and the bank card thing. The point of this post was moreso trying to figure out how we should base our business model.

    The main reason for wanting to contract with independent contractors is because I feel that it fits the idea of our business better. I am not a mechanic, and I don't know too much about cars. I just know how to get people to call us for mechanical services.

    As a small company without a lot of money to invest, it seemed that a better business model would be connecting clients with mechanics for a fee as a percentage. It's a much less involved company where the focus is in doing what I know best, getting clients to call us. So in a way, yes we are saving money, time, and hassle. But we are not trying to save money, time, and hassle by incorrectly labeling employees as contractors. We are trying to save money, time, and hassle by building a business model around being the middle man between clients and contractors.

    A lot of the bullet points we actually don't plan on doing because it doesn't match up with what we do as a business anyways. I just thought that if I were to get a response on each bullet point I could have a much better understanding of where the line stands between an employee and contractor relationship.

    We're still trying to shape our business model so all these responses have really helped a lot and given us a lot to think about. We plan on connecting with a lawyer as soon as we can come up with the money for it, and then we can have a much better idea of how to shape our business model.

    If anyone has any other advice in the meantime (even if it's not regarding my original question) I would love to hear it!

  2. #12
    Join Date
    Jan 2006
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    38,330

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    Our business is an on-site auto repair business. We get calls from people who need an auto mechanic, then we contract a mechanic to go perform the repairs at the person's home, or wherever they are. We take a fee as a percentage for getting the mechanics the job.
    so is your business a mobile mechanic service or a contractor that contracts to provide mechanical services from another business? Think Home Depot. You may want to research issues they have had with sourcing contractors for customers when it wasn’t made clear Home Depot doesn’t actually provide contractor services.

    You will also want to research where this puts you in regards to any laws North Carolina has regarding auto repair. Given you will not have your hands in a customer granting permission for any particular work (especially added work), you need to understand your legal liability if you represent yourself as the provider of the services to the costumer. Whose name (your business or the IC) will be on the legally required receipt?

    Who is providing any warranty given? How would you deal with substandard work by the IC?


    These won’t help you determine the IC/employee issue but will be of concern if you utilize IC’s. They also aren’t meant to elicit answers but are more of a “things to think about” post.

  3. #13
    Join Date
    May 2018
    Posts
    5

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    Quote Quoting cbg
    View Post
    It is very easy to have employees. It is not so easy to have IC's.

    https://www.irs.gov/businesses/small...ed-or-employee

    There is no single element that automatically makes someone an employee, or a contractor. It is the preponderance of evidence based on the 20 point checklist.

    https://www.walthall.com/wp-content/...-Checklist.pdf
    Thank you, that 20 point checklist made things a little bit more clear to me.

    Quote Quoting hr for me
    View Post
    i'd also be concerned about your last point - that one of the LLC owners also performs the same duties as an employee - why not make that person an IC also....
    The LLC owner does not strictly perform the same duties as an IC, and the main goal is that he will cease to once we are able to find enough ICs. The specific owner does much of the business management.

    Quote Quoting budwad
    View Post
    The IRS is but one of the considerations for tax withholding purposes and social security, but the more important considerations are state laws regarding workman's compensation and unemployment payroll payments. This is where the misclassification can really come back to hurt an employer.

    In NC, the Supreme Court set forth an eight-factor test (called the Hayes factors) to guide courts in determining when a person is an independent contractor:

    Not all factors are required, and no one factor is controlling over another; the Hayes factors are considered along with all other circumstances to determine whether in fact there exists in the one employed that degree of independence necessary to require his classification as independent contractor rather than employee.

    The case this is quoted from is an appeal from the North Carolina Industrial Commission's finding that the plaintiff was an independent contractor and not an employee for the purposes of a workman's comp claim. But it is the most current case and it explains the differences between an IC and an employee.

    OP, from what you posted as your business model, I would say that the people you intend to hire or subcontract to would be considered employees rather than IC. It would serve you well to consult an attorney before you start signing contracts with mechanics. Just because someone signs a contract to be an IC doesn't insulate you from being liable for injuries, workman's comp insurance, and unemployment payroll payments.

    Where I live in NJ there is a case where a rather large carpet company would sell carpet and the installation of the carpet was preformed by independent contractors. There were scores of them all under contract. But when one of them was injured and a workman's comp claim was denied by the companies insurance company and it went to court, the NJ Supreme court found that all the IC were actually employees. The company had to pay to the state penalties for no WC and no unemployment benefits. It put the company out of business.
    Wow an actual case in NC discussing this. That's great, thank you for providing that. I haven't gotten a chance to read it yet but in a few minutes I will.

  4. #14
    Join Date
    Oct 2006
    Posts
    15,183

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    Quote Quoting MattMutt
    View Post
    So the first thing that I will say is that right now we are not doing most of the things I mentioned. The only thing we are doing right now is the phone thing and the bank card thing. The point of this post was moreso trying to figure out how we should base our business model.

    The main reason for wanting to contract with independent contractors is because I feel that it fits the idea of our business better. I am not a mechanic, and I don't know too much about cars. I just know how to get people to call us for mechanical services.

    As a small company without a lot of money to invest, it seemed that a better business model would be connecting clients with mechanics for a fee as a percentage. It's a much less involved company where the focus is in doing what I know best, getting clients to call us. So in a way, yes we are saving money, time, and hassle. But we are not trying to save money, time, and hassle by incorrectly labeling employees as contractors. We are trying to save money, time, and hassle by building a business model around being the middle man between clients and contractors.

    A lot of the bullet points we actually don't plan on doing because it doesn't match up with what we do as a business anyways. I just thought that if I were to get a response on each bullet point I could have a much better understanding of where the line stands between an employee and contractor relationship.

    We're still trying to shape our business model so all these responses have really helped a lot and given us a lot to think about. We plan on connecting with a lawyer as soon as we can come up with the money for it, and then we can have a much better idea of how to shape our business model.

    If anyone has any other advice in the meantime (even if it's not regarding my original question) I would love to hear it!
    Okay, then it seems to me like you are interesting in being a small business version of Angie's List. Or possibly a handyman's version of UBER or LYFT, or even a handyman's version of AirBNB. That is a different model than your initial post seemed to indicate.

    There are different ways that those kinds of businesses can be organized. One option is that the contractors pay you a fee for being a member of your selling services, rather than you paying them a portion of the fees you collect for the jobs that they do. Other options could include you being paid for being a management company for the contractors or other possible options.

    However, in all of the successful operations of the nature you seem to indicate now, they would not be working for you, you would be working for them. As such, you certainly would have very limited control over what they do, and when and how often they work.

  5. #15
    Join Date
    May 2018
    Posts
    5

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    Quote Quoting jk
    View Post

    so is your business a mobile mechanic service or a contractor that contracts to provide mechanical services from another business? Think Home Depot. You may want to research issues they have had with sourcing contractors for customers when it wasn’t made clear Home Depot doesn’t actually provide contractor services.

    You will also want to research where this puts you in regards to any laws North Carolina has regarding auto repair. Given you will not have your hands in a customer granting permission for any particular work (especially added work), you need to understand your legal liability if you represent yourself as the provider of the services to the costumer. Whose name (your business or the IC) will be on the legally required receipt?

    Who is providing any warranty given? How would you deal with substandard work by the IC?


    These won’t help you determine the IC/employee issue but will be of concern if you utilize IC’s. They also aren’t meant to elicit answers but are more of a “things to think about” post.
    I had actually thought about that a little bit as well. It would seem that with the way IC's work, the IC's name would be on the receipt. But from my research I understood that our name would be on the receipt (like Uber, or Lyft). I understood that we cannot actually have the money go into the hands of the contractor before us, and we would have to be the ones paying the contractor for their services.

    Also from my research, I believe that there are not very many laws regarding auto repair. If damages are done to the car, it is something that the IC would be responsible for, and any necessary licenses would be something that the IC would need to assure they have. We don't have a warranty as of now, and if an IC provides substandard we will not contract with that IC again as we build a reputation for contracting with reliable contractors.

    The more I think of it though, the more it seems that if the IC is responsible for damages to the car, licenses, warranty, etc... the more that it seems that their name should be on the receipt.

    I know you weren't eliciting a response but I thought I would share what I had gathered on this information. In any case it's possible that some of my information is incorrect.

    EDIT:
    Quote Quoting llworking
    View Post
    Okay, then it seems to me like you are interesting in being a small business version of Angie's List. Or possibly a handyman's version of UBER or LYFT, or even a handyman's version of AirBNB. That is a different model than your initial post seemed to indicate.

    There are different ways that those kinds of businesses can be organized. One option is that the contractors pay you a fee for being a member of your selling services, rather than you paying them a portion of the fees you collect for the jobs that they do. Other options could include you being paid for being a management company for the contractors or other possible options.

    However, in all of the successful operations of the nature you seem to indicate now, they would not be working for you, you would be working for them. As such, you certainly would have very limited control over what they do, and when and how often they work.
    I suppose we were trying to be a mixture of the two. In a way, we would be working for them. However, in the same way we would also be working for our clients who are soliciting auto repairs. In this way we would need to assure quality results on both ends. Again, we haven't fully finished shaping our business model (as you might be able to tell based off how I keep describing it).

    EDITEDIT:
    A major inspiration for this business was https://www.yourmechanic.com. They contract independent contractors nationwide.

    • They refer to the mechanics that they contract as "Our Mechanics" on their website.
    • They process payments.
    • They pay hourly
    • They offer people ordering it a warranty.


    Here are some other phrases on their websites that seemingly break the contractor relationship.

    • "Provide your home or office location. Tell us when to meet you there." - This makes it clear that YourMechanic will be the one doing the repairs
    • "Feel free to ask your mechanic any questions you have about your car." - This possibly directs the way that mechanics perform the repairs, although I suppose they're not saying that the mechanic will answer your question.
    • "Our mechanics are available 7 days a week from 7am to 9pm." - This seems to set a time for their mechanics to work, although this is a weak one because mechanics still only take jobs they want.
    • "We're currently hiring in these cities:" - This is on the page where mechanics apply. Mechanics apply and interview for the "job", which seems pretty employee like.


    Based off of the research that I've been doing, just the way they talk about the whole thing makes it seem like their business model of doing auto repair would mean that their technicians are employees. Are they just doing it illegally and they have the legal team to continue this way since there is no fine line, or is this a viable business model that I would be able to reproduce?

  6. #16
    Join Date
    Jan 2006
    Posts
    38,330

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    I had actually thought about that a little bit as well. It would seem that with the way IC's work, the IC's name would be on the receipt. But from my research I understood that our name would be on the receipt (like Uber, or Lyft).
    my point is: who is the customer contracting with? That is going to determine who the costumer can sue if they need to.

    I understood that we cannot actually have the money go into the hands of the contractor before us, and we would have to be the ones paying the contractor for their services.
    your described model seems to prevent that.


    Also from my research, I believe that there are not very many laws regarding auto repair.
    there are enough you need to figure out how to handle who the cusomter is contracting with. If you there are requirements pertaining to estimates and approval of estimates and various other aspects.

    If damages are done to the car, it is something that the IC would be responsible for, and any necessary licenses would be something that the IC would need to assure they have.
    if the customer contracts with you, you are the repair shop that must hold any license any garage would be required to have. It would be you that face the issues if estimates are not properly provided and permission granted for additional work. (And many more things)

    but if the ic damages the car and refuses to pay, guess who is going to get sued if the customer contracted with you. The ic Likely will be sued to, if the customer knows the mechanic isn’t actually your employee anyway. I’m not sure I would allow a guy that doesn’t work for the garage I hired to fix my car work on my car.

    We don't have a warranty as of now, and if an IC provides substandard we will not contract with that IC again as we build a reputation for contracting with reliable contractors.
    so you offer no warranty to a customer? I don’t believe you can mandate an IC provide a warranty. Customers like warranties.


    The more I think of it though, the more it seems that if the IC is responsible for damages to the car, licenses, warranty, etc... the more that it seems that their name should be on the receipt.
    you’re changing your business model again. You really need to figure out what your business model is if for no other reason that that can affect your IC/employee situation. Obviously there are a lot of other reasons as well such as liability insurance, licensing, warranties, and more.


    Hopefully you haven’t actually started your business yet. You have a lot of issues to work through before you’re ready to open your doors.

  7. #17
    Join Date
    Feb 2008
    Posts
    1,103

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    you might consider talking your business model through with a business insurance agent to make sure you can get the coverages needed to run such a business.

  8. #18
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    23,852

    Default Re: At What Point Would Our Contractor Be an Employee, Are We Pushing a Limit [Nc]

    And in addition to that, please, please, please review your business plan and everything associated with it, with either an attorney or these people:

    https://www.sba.gov/

    Or possibly both. We're only scratching the surface here of all the things you'll need to be aware of.

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