If Iworked a year as an employee, can the company now force me to work as an independent contractor?

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If Iworked a year as an employee, can the company now force me to work as an independent contractor?

I will be subject to all the different tax issues.

Asked on January 27, 2011 under Employment Labor Law, South Carolina

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

If your duties have remained the same, you may well have a legitimate claim. The fact is that employee misclassification for the purposes of avoiding withholding tax, overtime pay, etc. is a deception that many employers attempt to use.  However, federal law states that an employee's job duties, not their job title, is the main factor in determining who is an employee versus independent contractor.

In making this determination, the relationship of the worker and the business must be examined. The main focus is on control and independence, which generally fall into 3 categories: Behavioral Control; Financial Control; Type of Relationship.

Behavioral Control:  Does the business have the right to direct and control how the worker does the task for which they are hired?  The more defined the direction and control  are, the more likely the worker is an employee.  The key factor in this is whether or not the business has retained the right to control the details of a worker's performance.

Financial Control:  Does the worker have any unreimbursed expenses?  Independent contractors are more likely to have unreimbursed expenses than employees.  Does the worker incur fixed ongoing costs whether or not the work is currently being done? Yes to this question indicates the worker is an independent contractor.  Does the worker make his or her services available to other businesses? This is a clear indication of being classified as an independent contractor status. Is the worker paid a regular wage?  An employee is generally guaranteed a regular wage amount for a set period of time; on the other hand, an independent contractor may be paid based on a per job basis or by the hour.

Type of Relationship:  What is the work arrangement between the business and the worker?  Does the business provide the worker with employee-type benefits, such as insurance, a pension plan, and PTO? If so, the worker has the characteristic of an employee.  How permanent is the arrangement?  If the worker's the expectation that the relationship will continue indefinitely, rather than for a specific project/period, then it is more likely that it is an employer/employee relationship.   

Here is a link to a site that will provide further information:  http://www.irs.gov/businesses/small/article/0,,id=99921,00.html


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