TRACEY’S PRACTICAL EMPLOYMENT TIP
OF THE MONTH*

OCTOBER 2009: ARE YOU REALLY AN INDEPENDENT CONTRACTOR?*

It is to the company’s benefit, and usually to your detriment, to characterize your employment relationship as that of an independent contractor or consultant. It saves the company payroll taxes, its share of your social security contribution, and the cost of providing you with employee benefits. In addition, the company is also not subject to the various federal, state and local employment laws that protect you in the workplace, such as Title VII, ERISA or the FMLA.

However, characterizing you as an independent contractor in your agreement or personnel file and paying you on a 1099 basis, does not mean you are, legally, an independent contractor. The courts and the IRS look at a large number of factors in determining whether your employer has mischaracterized you as an independent contractor. The primary factor centers on control. Does your employer control the place, time and manner of your work? Does the employer require your presence in the office while the work is being accomplished? Do you report to a company manager or have company employees reporting to you? Can you simultaneously provide services to another company? Are you working on a discreet project with a time limit on its completion or are you coming to work everyday and being treated in all respects like your colleagues who are employees.

In many instances, independent contractors are really W-2 employees who are losing out on company benefits and the protection of the law while paying an extra 6.5% in taxes on the first $110,000 they earn. If you find yourself in this situation, the question to ask is whether the benefit you derive from being an independent contractor (and there can be many) outweighs the benefit of being an employee.

Next Month’s Tip: THE COMPANY COMPUTER IS NOT YOURS

Monthly Tip Archive

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* Disclaimer: The contents of this page are for informational purposes only and nothing herein is intended to constitute legal advice nor should anything contained herein be taken or relied on as such. Each individual executive and employee has a unique set of facts and circumstances that the general discussion set forth above may be wholly inapplicable to. Only through consultation with a lawyer from our firm in which all of the facts and circumstances of an individual’s unique situation are explored and considered can a true legal assessment of your rights and remedies be ascertained. Any use of this information is taken solely at your own risk.