Monday, June 29, 2015

EMPLOYEES, INDEPENDENT CONTRACTORS--RESPONSE TO COMMENTS ON BLOG_


 

 

I recently reposted a blog that I had written about 6 months ago that relates to an important and currently issue in the massage community. The issue is confusion over employee practice or independent contractor practice.  I am not a lawyer.  If you have specific questions about your status contact the IRS, Department of Labor, or legal counsel.

Two Facebook comments worthy of mentioning are:

Marni Matyus writes -Thank you for posting this. I slightly disagree in your definition of an IC as a room renter. Room rental is not an IC or an employee. Ultimately the IRS decides IC situations on a case by case basis. It is acceptable to hire an IC to complete a job/project. It is reasonable to expect the IC to adhere to the dress code of the business when working for the public and to present themselves to the public as an employee. Generally an IC sets their own hours and usually provides much of their own equipment. The employer can not tell you how to do the job but can set expectations on what the outcome will be. In IC situations, usually the customer pays the business who then pays the therapist and provides a 1099 at the end of the year. It would be unreasonable to expect an IC to sign any type of non-compete. So.. the IRS only offers "guidelines". Independent contractors are individuals who contract with a business to complete a certain task. (Which can be: massage my customers during these hours). If the IRS determines that employees are improperly classified, there are severe penalties for the employer.

Della Szeszol Melville writes: An IC is not the same as a renter. This article portrays an IC as a renter. Paying a percentage or per massage fee is not completely correct either as it would depend on whether or not that's legal in your state, and also depends on how the money is handled.

Thank you both for your clarifications. 

To better understand this issue I did some research this morning and have posted below some content with where you can access it for future reference.  I did not write this material but I do think it helps clarify the situation.

SANDY HERE-WHEN YOU SEE THIS I AM ADDING MY COMMENTS

THE FIRST ARTICE IS WRITTEN FOR CHIROPRACTIC AND APPLIES TO MASSAGE THERAPIST IN THIS ENVIRONMENT.                               

The Independent Contractor Trap By John T. Whitney, DC

NOTE: The IRS can be very fussy, so please refer to their Independent Contractor page for the complete definition.

More and more new graduates find the cost of startup too steep and the whole prospect of starting from scratch too risky. The newbies usually end up as, "associates", (employees) and hate it. There is another way. In chiropractic the term "independent contractor", means many things to many people, and that is unfortunate. What it is not, is an employee, who is obliged to follow the dictates of the host (owner) doctor.

Many field doctors seeking an associate (employee) use the term Independent Contractor (I.C.) . . . wrongly. The host doctor often presents a contract to the one seeking to be a true independent. Upon reading the contract one is quick to realize that the (well-meaning) host doctor is really requesting an associate (employee) and that the only reason the agreement is labeled Independent Contractor is in an effort to shirk the responsibility as employer (collect tax and provide benefits). The government is not amused by this thinly disguised deception and provides a hefty fine for those doctors caught using this ruse.

The key factors deciding what is an I.C. and what is an associate (employee) are quite simple. If the senior doctor appears to be dictating (hours, methods of care, holidays, days to be worked and items similar) the IRS will consider the new doctor an employee. If you are in any doubt call the IRS for a ruling.(IRS form SS-8)

Another big, big factor is who "owns" the patients. If the contract states that the patients (patient files) remain the property of the clinic, should the IC decide to move on, you can be sure there is nothing "independent" about the I.C. agreement.

The final tip-off is: is the associate being asked to sign a non-compete clause, e.g. 15 miles for 5 years? If one were to sign something like this, again, there is no "independent" in the Independent Contractor agreement.

To be blunt, most contracts labeled as IC. agreements are nothing more than a shallow attempt to hoodwink the new doctor into thinking the agreement is something it is not. Often the host doctor is not even aware of the deception since he likely got a copy of the document from a chiropractic friend who got it from another chiropractic friend who copied it from who knows where.

DEFINITION OF A TRUE INDEPENDENT CONTRACTOR:

One who leases space in another (already, up-and-running) office. The space may be fully serviced space (complete with telephones, adjusting tables, exam equipment, x-rays, stationery, postage, complete staff, etc.) or partially serviced (supplies some of the needed staff, equipment, supplies). One would be expected to pay commensurate with that which is supplied.

Everything is negotiable.

HOW MUCH?:

In years gone by it was common for an I.C. to simply pay only a percentage of collections. A typical starting lease-fee mightbe 40% of collections. Today that kind of arrangement would cause the IC to be categorized as an employee by the IRS (not Revenue Canada however).Do not use this method in the USA, it is not legal. The host doctor using this percentage method will be severely punished by the IRS and be forced to pay a fine, penalties, and the equivalent taxes levied on the IC. The preferred method for an I.C. to pay for her space, is to have a set monthly base payment (e.g. $500). Five hundred dollars a month to lease space is certainly a small amount of money. But could be fair for a few months until the size of the practice increased. At some arbitrary time in the future the host doctor could impose what is known as, "additional rent". That arrangement is not only fair for the I.C. but satisfies the IRS.

Example:

* First 3 months lease fee could be $500.

* Fourth month lease fee could be $500 plus 25% of collections.

From that point until collections reach $20,000 per month, the fee could be $500 plus 30% of collections.

Once $20,000 per month is exceeded in collections, the amount between $20,000 and $25,000 could be at 35% of collections plus the $500 base rent.

Once $25,000 per month is exceeded in collections, the amount between $25,000 and $30,000 could drop back to 30% ( we are now getting into economies of scale) of collections plus the $500 base rent.

This could continue until the rent paid ($500) and % of collection reaches, say $4000 per month, (arbitrary) and level off there. All of this is negotiable, but the figures shown are fair guidelines.

One of the questions asked is "who gets the uncommitted call ins?" To be fair, there are two main considerations in applying the following formula; the length of time the senior doctor has been in the location and the effectiveness of the location for walk-ins.

One idea is that uncommitted call-ins & uncommitted walk-ins, go into rotation, perhaps giving the senior doctor 3:1 for the first three or four months, 2:1 for the next 6 months and do a 1:1 division at the end of one year.

This can be complicated if only one of the doctors is an aggressive promoter/marketer. Perhaps co-operative marketing could solve this problem (split costs 50/50).

When one covers for the other under a locum arrangement, it should be treated no differently than if a locum were hired for the task. That is to say; pay who ever looks after your patients 30 to 50% of services rendered.

The I.C. arrangement has many positive aspects to it for both parties. In an I.C. arrangement one achieves benefits of an employee practicing in a busy office with supportive professional associate, at a know address and yet is independent. Start-up cost are minimal compared to opening a solo practice.

The host doctor benefits in several ways also; built-in locums, possible built-in buyer, passive income (windfall), a close at-hand colleague, expands the service hours of his/her establishment.

 

The I.C. is truly a wonderful opportunity for both host and I.C. There is a flaw however; the human element. The host-I.C. arrangement requires two mature human beings who realize that there will always be differences of opinion with real or imagined,"slights". Conflict and compromise is the order of the day, and frequent, regular meetings are essential to keep the lines of communication open and to avoid little problems festering to big problems. That does not seem like much does it? The reality is that without maturity and frequent meetings the sleeve becomes unraveled.

In most cases the host provides everything necessary for the I.C.to conduct a practice except marketing dollars .The cost for an I.C. to set up would only be for any specialty items he or she requires, and a financial cushion for 3-6 months for living and business expenses

From the standpoint of a host, a little construction work may be necessary in the office to prepare an office for the I.C., the computer must be programmed for a second doctor, (another) color coded set of files ordered (important!), and an explanation and training given to the staff on office protocol changes. The I.C. must not be regarded as an extra burden, by the staff or treated like a second banana by the host doctor or staff, a common occurance.

In time, more staff will likely be needed. The host should not view this as a burden but as a sign of progress and also a promise of an increase in her passive income. If a host doctor has the space, several I.C.'s could eventually practice in the facility. This can represent a significant source of income for the host. The I.C. should be rather picky about what office he/she joins. Number one is that it must be a busy office. If it is not, the I.C. will likely struggle along with the host. If one joins a busy office the IC practice can grow rather quickly from the spill-over of the hosts practice alone, - saving many marketing dollars and time.

The host should screen the I.C.'s who wish to practice in his office for personality, gender, techniques, and aggressiveness. It is well known that female practitioners are preferred by patients and grow their practices rather quickly. It is also well known that females spend more time with patients and see fewer patients on an average basis. Women practitioners are absent from the office more often then men. A female practitioner can add a sense of balance to a male dominated office.

An Independent Contractor does not sign a non-compete clause but should expect to sign a non-solicitation clause. A non-solicitation clause should be signed by a host and I.C. alike.

INDEPENDENT CONTRACTOR ARRANGEMENTS:

* Use a rotation system for uncommitted patients.

* The host has no control over the I.C.'s practice.

* IC. can move next door and take their practice with them when contract expires.

* Input must be graciously considered by both parties.

* The I.C. is a very valuable property.

* 30%-50% of gross business of the vacationing doctor is paid to the person who covers.

BENEFITS FOR INDEPENDENT CONTRACTOR

1. Proven location

2. Master of your own ship

3. Motivational due to empowerment

4. Lower risk than solo startup

5. Proven market

6. Affiliation without dependency

7. Lower start up costs

8. No restrictive covenants

FINANCIALS FOR IC

1. Up front marketing costs - Yellow Pages - Opening Announcement

Legal Fees - Accounting Fees - Malpractice Ins. - Disability Ins.

2. Any equipment or office supplies needed but not covered by the arrangement.

3. Living and business expenses for 3-6 months.

As a matter of form, it would be more appropriate to refer to this type of practice arrangement as a "Sub-Lessee", which is an accepted legal term, rather than an "Independent Contractor", which is a red flag to the IRS. http://www.chiro.org/newDCs/Independent_Contractor_Trap.shtml

SANDY HERE: SO BASED ON THIS INFORMATION THE ROOM RENTER/SUB-LESSEE IS A MORE CLEAN WAY TO DO BUSINESS.

THE NEXT ARTICLE WAS WRITTEN WAY BACK IN 2002. MAKES ME WONDER WHY WE REMAIN SO CONFUSED

Independent Contractor, Employee, Booth Renter: Which Piece Am I?

Business Side By Ken Cassidy

Originally published in Massage Bodywork magazine, December/January 2002.

Copyright 2003. Associated Bodywork and Massage Professionals. All rights reserved. http://www.massagetherapy.com/articles/index.php/article_id/454/Independent-Contractor-Employee-Booth-Renter:-Which-Piece-Am-I

Distinguishing how to run your business is the most important thing you can do for professional peace of mind. A question frequently asked by concerned bodywork practitioners regarding their relationship to their employers is "What am I: An employee, a booth renter or an independent contractor? As frightening as it may seem, there are many who don't realize there is a difference.

The alarming truth is 90 percent of all businesses in the beauty and wellness professions are operating incorrectly under the wrong classification, which can lead to trouble for both the owner and the renter when facing taxes, not to mention unemployment and/or disability.

In May 2000, the IRS published an educational pamphlet detailing the differences between an independent contractor, employee and booth renter (Publication 3518, Catalog 73164X). Regardless, many are still unknowingly operating illegally. Let's take a closer look at the three categories in order to become more familiar with the similarities and differences.

Employees

Most of us are aware of the business relationship between an employer and employee. The business owner pays an operator a wage, commission or salary, and pays all related taxes to the IRS and their state; employees are covered by workers' compensation and state unemployment. At the end of the year, the business owner serves the employee with an IRS Form W-2. The business owner also has total control over the services, actions, dress and behavior of the employee during their tenure.

Booth Renter

When renting a booth, the business owner leases "space," be it a station, or esthetician or massage therapy room, to the operator for a flat rate of rent. This rented space is the primary location from which the operator conducts their business. At this time, they are small business owners, a mini-salon owner if you will, operating within the business owner's facility. The booth renter may come and go as they please (within the operating hours of the business), set their own prices, book their own clients, generate their own advertising and collect their own fees for services rendered. The renter pays his own taxes and is not covered by workers' compensation, employer matched unemployment or disability insurance. The booth renter serves the business owner with an IRS Form 1099 at the end of the year for all rents paid over $600. The renter can, however, make commissions on retail sales made by vending the business owner's products (provided the business owner retains retailing rights), in which case, the business owner would serve the renter with an IRS Form 1099 for amounts more than $600.

Independent Contractor

Let me preface this classification by stating only half of 1 percent of the operators in the beauty and wellness industry qualify as an independent contractor. Having said that, let's examine this business relationship. Like a booth renter, the independent contractor operates their business independently of the business owner. However, the salon, day spa or wellness center is not their primary place of operation. They are not leasing space; they are not on the payroll. They are paid on a service-by-service basis and are responsible for all their taxes.

 

For instance, let's say as the business owner you have a client who requests the services of a massage therapist. You own the massage therapy room, but have no massage therapists on payroll, nor do you have anyone leasing the massage room at that particular time. You do, however, have the names of several licensed massage therapists in your area. You call several until one is able to service this appointment at your facility. You then book the appointment with the client, collect from your client after services are rendered, then pay the massage therapist from the salon account. You would then serve the independent contractor with an IRS Form 1099 at the end of the year for services rendered for amounts more than $600.

Contracts and Agreements

Now let's examine how to prove your business relationship. I cannot stress enough the importance of a business foundation in the form of a contract, whether it is a business employment agreement, a space sub-lease for booth renters or an independent contractor's agreement. Regardless of how an owner operates the business, a contract will protect both parties in the event of a disagreement, even if it escalates to a court of law. A solid contract will most often alleviate those headaches, not to mention protect the business owner and the operator in the event of an audit by the state or IRS.

A business employment agreement will outline what is expected from the business owner and employee alike. The space sub-lease (or lease if the salon or day spa owns the property) will clearly show the business relationship between the business owner/landlord and the booth renter. A weak contract between owner and renter does not prove the parameters of the day-to-day business relationship of both parties. Weak contracts often depict an employer/employee relationship, rather than the clear-cut separation of two independent businesses, and is essentially useless if audited, making the business owner liable for all back employment taxes, including penalties and interest owed for the time period in question (usually a three-year time frame), causing a financial and legal nightmare. This scenario is coupled with the fact that once one agency finds you liable for back taxes, others are quick to follow suit.

The same applies with an independent contractor's agreement. A business owner should have the contract with the independent contractor clearly define the working arrangement between both parties. It is better to be covered for what might happen versus not being covered for what has already occurred.

I have only provided a small piece of the big picture of employment responsibility and whose role it is to pay all of the appropriate taxes in a business relationship. Whether you are a business owner, an employer/employee, a space renter, or in a few cases, an independent contractor, the single most important tool you should have is a solid contract. Whether it is a tax issue, a business issue, an unemployment/disability issue, or a dispute that ends up in front of a judge, the business agreement or contract is going to be the determining factor in 99 percent of most cases. It is important to know that not just any contract will work for you (i.e., writing one on your own). It is how the contract is worded that will protect you and give it the validity to withstand time. Improper or incorrect content is the No. 1 reason audits occur and fail. Protect yourself, your loved ones and your investments.

Ken Cassidy has been a cosmetologist for 30 years, licensed cosmetology instructor for 18 years, business owner for 27 years and has operated businesses with both employees and contract labor. A writer and lecturer, Cassidy has been published in numerous journals and has worked across the country with distributors, salon owners and managers setting up their businesses for employees, contract labor and booth renting. Cassidy markets business education for the beauty industry that shows how to run a successful business for employees and/or contract labor and how to be more profitable legally. For more information about business agreements, space sub-leases and other business management issues, contact Cassidy by visiting

www.kassidys.com.

SANDY HERE

THE NEXT ARTICLE IS FROM THE IRS

Hire a Contractor or an Employee?

Independent contractors and employees are not the same, and it's important to understand the difference. Knowing this distinction will help you determine what your first hiring move will be and affect how you withhold a variety of taxes and avoid costly legal consequences.

What’s the Difference?

An Independent Contractor:

·        Operates under a business name

·        Has his/her own employees

·        Maintains a separate business checking account

·        Advertises his/her business' services

·        Invoices for work completed

·        Has more than one client

·        Has own tools and sets own hours

·        Keeps business records

An Employee:

·        Performs duties dictated or controlled by others

·        Is given training for work to be done

·        Works for only one employer

Many small businesses rely on independent contractors for their staffing needs. There are many benefits to using contractors over hiring employees:

 

·        Savings in labor costs

·        Reduced liability

·        Flexibility in hiring and firing

Why Does It Matter?

Misclassification of an individual as an independent contractor may have a number of costly legal consequences. If your independent contractor is discovered to meet the legal definition of an employee, you may be required to:

·        Reimburse them for wages you should've paid them under the Fair Labor Standards Act, including overtime and minimum wage

·        Pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment

·        Pay any misclassified injured employees workers' compensation benefits

·        Provide employee benefits, including health insurance, retirement, etc.

Tax Requirements

Visit the IRS Independent Contractor or Employee guide to learn about the tax implications of either scenario, download and fill out a form to have the IRS officially determine your workers’ status, and find other related resources.

Employment Information

There is no single test for determining if an individual is an independent contractor or an employee under the Fair Labor Standards Act. However, the following guidelines should be taken into account:

·        The extent to which the services rendered are an integral part of the principal's business

·        The permanency of the relationship

·        The amount of the alleged contractor's investment in facilities and equipment

·        The nature and degree of control by the principal

·        The alleged contractor's opportunities for profit and loss

·        The amount of initiative, judgment, or foresight in open market competition with others that is required for the success of the claimed independent contractor

·        The degree of independent business organization and operation

Whether a person is an independent contractor or an employee generally depends on the amount of control exercised by the employer over the work being done. Read Equal Employment Opportunity Laws - Who's Covered? for more information on how to determine whether a person is an independent contractor or an employee, and which are covered under federal laws. Independent Contractors vs. Employees Authored By: Partnership for Legal Access

 

SANDY HERE

THE NEXT ARTICLE IS BASED ON THE Texas Workforce Commission under the Texas Payday Law. IT USES A QUESTION ANSWER FORMAT

What is the difference between an independent contractor and an employee?

In a very general way, an independent contractor is a self-employed person who operates her own business and is able to carry out that business independently of the other businesses with whom she contracts - her customers. An employee is a person who is not in business for himself but works in a business owned by someone else and is dependent on that business for the terms and conditions of his employment and for his continued employment.

· What difference does this distinction between independent contractor and employee make?

There are many legal protections, liabilities and relationships vary depending on whether the working relationship involved is between an employer and employee or rather between an independent contractor and a customer of that contractor's services.

· What difference does this distinction between independent contractor and employee make with respect to employment protections?

Specifically with regard to employment rights, most statutory employment protections apply to employers and employees but do not apply to independent contractors. For example the requirements the state and federal minimum wage laws and federal overtime laws protect only employees who are employed by an employer. The Texas Payday Law protects only an employee who is employed by an employer. None of these laws protect an independent contractor - even if the independent contractor was paid less than minimum wage or overtime or was not paid at all for her work.

· What difference does this distinction between independent contractor and employee make with regard to employment benefits?

The other reason the distinction matters is that most employment-related social safety-net benefit programs are set up mainly to protect employees. Employees for example, are covered by workers compensation and unemployment insurance laws, while independent contractors are not. Employers are required to pay half of the FICA tax contributions for their employees (7.65% of gross wages), while independent contractors have to pay the entire FICA tax themselves (15.3% of gross wages). Similarly private employment benefits, such as health insurance or retirement plans, are much more likely to be available to employees and much more rarely to independent contractors especially if they are low-income.

· Why do we guarantee fewer employment protections and benefits for independent contractors than employees?

The theory is that independent contractors are owners and operators of their own businesses and therefore they have enough economic power to drive a hard bargain and take care of themselves. So they don't need the protections of the law the way employees do.

 

· Why has it become so difficult to determine who is an independent contractor and who is an employee?

The law defining the difference has never been completely clear cut. There have always been some variations in the definition of independent contractor and employee from one law to the next and variations from one court ruling to the next. But in recent years more and more businesses have begun to reclassify people who formerly were considered employees to now consider them independent contractors. Some businesses have seen this as a way to try to escape responsibility for complying with employment laws (for example overtime laws) and for shifting costs from the business onto the worker (for example FICA taxes and workers compensation premiums).

· If a worker is called an "independent contractor" does that mean they don't have the employment rights of an employee?

Not necessarily. Just labeling a worker as an "independent contractor" does not by itself mean that he is an independent contractor. Even if he believes he is an "independent contractor," that may only be because that is what he has been told. It is necessary to apply the legal test to determine whether he really is an independent contractor or an employee.

· So what is the legal test for determining who is an employee and who is an independent contractor?

This is a little complicated because somewhat different tests are used by different agencies and different laws. But most of the tests are similar and there are some common rules of thumb that help to separate independent contractors from employees. One version of the test that is helpful is the test used by the Texas Workforce Commission under the Texas Payday Law. This test spells out 20 questions that clarify who is an employee and who is an independent contractor.

The TWC test for independent contractors vs. employees

· The following 20 factor test has been formally adopted by the Texas Workforce Commission for determining who is an employee and who is an independent contractor under the Texas Payday Law. As a practical matter is it also the test the TWC uses when enforcing the minimum wage and overtime requirements under the federal Fair Labor Standards Act and the Texas Minimum Wage Act. http://www.twc.state.tx.us/ui/tax/forms/c8.pdf

EMPLOYMENT STATUS - A COMPARATIVE APPROACH

Under the common law test, a worker is an employee if the purchaser of that worker's service has the right to direct or control the worker, both as to the final results and as to the details of when, where, and how the work is done. Control need not actually be exercised; rather, if the service recipient has the right to control, employment may be shown. Depending upon the type of business and the services performed, not all of the twenty common law factors may apply. In addition, the weight assigned to a specific factor may vary depending upon the facts of the case.If an employment relationship exists, it does not matter that the employee is called something different, such as: agent, contract labor, subcontractor, or independent contractor.

1. INSTRUCTIONS:

An Employee receives instructions about when, where and how the work is to be performed.

An Independent Contractor does the job his or her own way with few, if any, instructions as to the details or methods of the work.

2. TRAINING:

Employees are often trained by a more experienced employee or are required to attend meetings or take training courses.

An Independent Contractor uses his or her own methods and thus need not receive training from the purchaser of those services.

3. INTEGRATION:

Services of an Employee are usually merged into the firm's overall operation; the firm's success depends on those Employee services.

An Independent Contractor's services are usually separate from the client's business and are not integrated or merged into it.

4. SERVICES RENDERED PERSONALLY:

An Employee's services must be rendered personally; Employees do not hire their own substitutes or delegate work to them.

A true Independent Contractor is able to assign another to do the job in his or her place and need not perform services personally.

5. HIRING, SUPERVISING & PAYING HELPER:

An Employee may act as a foreman for the employer but, if so, helpers are paid with the employer's funds.

Independent Contractors select, hire, pay and supervise any helpers used and are responsible for the results of the helpers' labor.

 

6. CONTINUING RELATIONSHIP

An Employee often continues to work for the same employer month after month or year after year.

An Independent Contractor is usually hired to do one job of limited or indefinite duration and has no expectation of continuing work.

7. SET HOURS OF WORK:

An Employee may work "on call" or during hours and days as set by the employer.

A true Independent Contractor is the master of his or her own time and works the days and hours he or she chooses.

8. FULL TIME REQUIRED:

An Employee ordinarily devotes full-time service to the employer, or the employer may have a priority on the Employee's time.

A true Independent Contractor cannot be required to devote full-time service to one firm exclusively.

9. LOCATION WHERE SERVICES PERFORMED:

Employment is indicated if the employer has the right to mandate where services are performed.

Independent Contractors ordinarily work where they choose. The workplace may be away from the client's premises.

10. ORDER OR SEQUENCE SET:

An Employee performs services in the order or sequence set by the employer. This shows control by the employer.

A true Independent Contractor is concerned only with the finished product and sets his or her own order or sequence of work.

11. ORAL OR WRITTEN REPORTS:

An Employee may be required to submit regular oral or written reports about the work in progress.

An Independent Contractor is usually not required to submit regular oral or written reports about the work in progress.

12. PAYMENT BY THE HOUR, WEEK OR MONTH:

An Employee is typically paid by the employer in regular amounts at stated intervals, such as by the hour or week.

An Independent Contractor is normally paid by the job, either a negotiated flat rate or upon submission of a bid.

13. PAYMENT OF BUSINESS & TRAVEL EXPENSE:

An Employee's business and travel expenses are either paid directly or reimbursed by the employer.

Independent Contractors normally pay all of their own business and travel expenses without reimbursement

14. FURNISHING TOOLS & EQUIPMENT:

Employees are furnished all necessary tools, materials, and equipment by their employer.

An Independent Contractor ordinarily provides all of the tools and equipment necessary to complete the job.

15. SIGNIFICANT INVESTMENT:

An Employee generally has little or no investment in the business. Instead, an Employee is economically dependent on the employer.

True Independent Contractors usually have a substantial financial investment in their independent business.

16. REALIZE PROFIT OR LOSS:

An Employee does not ordinarily realize a profit or loss in the business.

Rather, Employees are paid for services rendered.

An Independent Contractor can either realize a profit or suffer a loss depending on the management of expenses and revenues.

17. WORKING FOR MORE THAN ONE FIRM AT A TIME:

An Employee ordinarily works for one employer at a time and may be prohibited from joining a competitor .

An Independent Contractor often works for more than one client or firm at the same time and is not subject to a non-competition rule.

18. MAKING SERVICE AVAILABLE TO THE PUBLIC:

An Employee does not make his or her services available to the public except through the employer's company.

An Independent Contractor may advertise, carry business cards, hang out a shingle, or hold a separate business license.

19. RIGHT TO DISCHARGE WITHOUT LIABILITY:

An Employee can be discharged at any time without liability on the employer's part.

If the work meets the contract terms, an Independent Contractor cannot be fired without liability for breach of contract.

20. RIGHT TO QUIT WITHOUT LIABILITY:

An Employee may quit work at any time without liability on the Employee's part.

An Independent Contractor is legally responsible for job completion and, on quitting, becomes liable for breach of contract.

 

C-8 (0406)Source: Texas Administrative Code, Title 40, Part 20, ' 821.5.

 

· How do use all these 20 different factors in combination with one another?

The most practical and effective approach is to apply each of the 20 questions to the facts of the case you are trying to evaluate. Pick out those 3, 4 or 5 questions that seem as a matter of common sense to most clearly capture the economic reality of the work relationship. Emphasize those factors in making your case to an opposing party, or an administrative agency, or a court.

· Does it matter if there is a written agreement signed by the worker, stating the she is an independent contractor?

Not really. What matters is the true economic reality of the relationship. If the worker had no real bargaining power in the relationship - which tends to suggest she is an employee - of course she would feel like she had to sign whatever document her employer required her to sign.

SANDY HERE –THE FOLLOWING IS FROM THE SMALL BUSINESS ASSOCIATION


·        Avoid Exercising Control Over Independent Contractors

·        Once you have hired an independent contractor, there are a number of work habits you should avoid if you want the IRS and other agencies to respect that classification:

·        Don't supervise the IC or his or her assistants. The IC should perform services without your direction.

·        Don't let the IC work at your offices unless the nature of the services absolutely requires it.

·        Don't give the IC employee handbooks or company policy manuals.

·        Don't establish the IC's working hours.

·        Avoid giving ICs so much work or such short deadlines that they have to work full time for you.

·        Don't provide ongoing instructions or training.

·        Don't provide the IC with equipment or materials unless absolutely necessary.

·        Don't give an IC business cards or stationery to use that have your company name on them.

·        Don't give an IC a title within your company.

·        Don't pay the IC's travel or other business expenses directly.

·        Don't give an IC employment benefits.

·        Don't require an IC to give you formal written reports.

·        Don't invite an IC to employee meetings or functions.

·        Don't refer to an IC as an employee or to your company as the IC's employer.

·        Don't pay ICs on a weekly, biweekly, or monthly basis as you pay employees. Instead, require ICs to submit invoices, and pay them at the same time you pay other outside vendors.

·        Follow the terms of the IC agreement, including its termination provisions.

·        Don't give the IC new work after the original project is completed without signing a new IC agreement.


SANDY HERE.

FINALLY IS A LINK THAT  EXPLAINS THE SITUATION BUT THE ARTICLE IS TOO LARGE TO PUT HERE FOR YOU

KNOW YOUR RIGHTS IN THE SALON: EMPLOYEE, INDEPENDENT CONTRACTOR, BOOTH RENTER


 

SANDY HERE:  OK, I DID A BUNCH OF WORK FOR YOU. MOST MASSAGE THERAPIST CLASSIFIED AS INDEPENDENT CONTRACTORS SHOULD BE CLASSIFIED AS EMPLOYEES.  THERE ARE MANY GOVERNMENT PROTECTIONS FOR EMPLOYEES AND THE BURDEN IN ON THE EMPLOYER.  THE WAGE STUCTURE FOR EMPLOYEES IS MUCH DIFFERENT THAN SELF-EMPLOYEE/INDEPENDENT CONTRACTOR.  I AM GOING TO TAKE THE RISK AND TACKLE THAT HORNETS NEST NEXT.

 

3 comments:

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