What Exactly Are You?

Another update from the Jungle….

Otis feels a bit frazzled lately.  His lawn care business has to speed up preparations for the busy summer season even though it’s only February.  A mild winter fooled Mother Nature into starting spring much too early.  Now his customers look at their scruffy flower beds and patchy lawns and fear being lawn-shamed by the neighbors. Otis’ phone is ringing non-stop.     

Otis isn’t ready for the upsurge in business. His year-round employees, Jose, Angel and Miguel, can’t handle all the appointments. Between customer calls, Otis is speed-dialing his usual summer helpers.  His summer crew is a motley bunch, including college students, a massage therapist and a former professional soccer player with more tattoos than a career felon.

Otis always treated his summer workers as independent contractors or 1099 workers. As 1099’s, these workers are self-employed and responsible for all employment taxes.  Many of his summer workers prefer this arrangement because they are running businesses of their own and besides, they like getting more money now.

Now as Otis begins calling his summer helpers, he hits an unexpected snag with Matt.  Matt is the son of a friend, originally hired as a favor for Matt’s dad.  Matt doesn’t know what he wants to be when he grows up so he is an average worker.   He livens up the place, though, practicing his Spanish with Miguel, flirting with the massage therapist despite her obvious lack of interest, and staging drag races with the mowers. 

But Matt is lukewarm when Otis calls about returning for another summer.  Matt says that he met a girl in a bar who is a pre-law student and she said Otis is breaking the law by not paying him as an employee.  Matt says that he wants to be treated as an employee because he wants overtime pay, health benefits and lots of paid leave.    

What options are available to Otis?

  1. He can let Matt ferment like the compost heap behind the equipment shed and move to the next name on the summer hire list.
  2. He can ignore the issue on the grounds that his company is too small to be noticed by the IRS or the state’s labor department.
  3. He can rummage through the IRS website looking for information on how to tell the difference between a W-2 and a 1099 worker which will take up time that he doesn’t really have at the moment. 

There is no bright line test dividing 1099 from W-2 workers; it depends on the total circumstances. Basically, the more control a company has over how and when the work is done, the more likely the worker is a W-2 employee.

If your company is struggling with HR issues, Corporate Compliance Risk Advisor can help you create HR policies that are appropriate for your company’s size and then serve as a resource to your staff as the policies are implemented.

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