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    4 Replies Latest reply on May 17, 2009 9:32 PM by BizOptimizer

    1099 Labor

    s.w.r.s. Newbie

      Other than giving the person a 1099 Form at the end of the year is there some kind of contract that you should have them sign? I was just told by someone who was paying their people as contract labor (1099) that one of his employees was able to get unemployment.
        • Re: 1099 Labor
          cutcomp Wayfarer
          A lot of states have been cracking down on what they view as abuse of the independent contractor status. And states have been passing new legislation to tighten up regulations that differentiate between employees and true independent contractors. There are a number of "tests" one can find, oneline and off, to try to differentiate between true independent contractor status and employees--and these have to do with the nature of the work and the oversight and control exercised by the employer. These tests do not give much, if any, weight to the contractual language in the agreement, as this is often a very one-sided "negotiation", with the employer generally holding the whip hand. So there probably isn't much you can do about the language in the agreement that will make a difference.

          What often makes a difference are things like is the worker doing the same kind of work as your business, and do you control how the worker performs the work? Also, does the worker operate his or her own business with other clients besides you? For example, if your business is insurance consulting (like mine) you might well hire an independent contractor to clean the office. As this is work different from your primary business, this would tend to strengthen the argument that the workers was a true independent contractor. If the worker advertised these cleaning services and had other clients, it wouild also make a strong argument that this was a true independent contractor relationship. However, if the worker did filing for your office, and you exercised supervision and direction over his work, and the worker had no other clients and did not operate a business of his own, these factors would likely be considered indicators that the worker was an employee under the law, and now an independent contractor.

          Many businesses, large and small, have abused the independent contractor relationship, seeking to avoid responsibility for unemployment taxes, Workers Compensation, and payroll tax and withholding responsibilities, while still exercising control and direction over workers that are the norm with employees. States are now enforcing their laws to address these abuses, and contract language is probably not going to provide a meaningful protection if the other aspects of the work relationship are contrary to independent status.
          • Re: 1099 Labor
            LUCKIEST Guide
            1099 Labor, Welcome

            You are mixing Apples with Oranges. Yes an employee can collect unemployment.

            A 1988 is NOT an employee and can NOT collect UI.

            Did I tell you the Brooklyn Bridge is for sale (Cheap)
              • Re: 1099 Labor
                cutcomp Wayfarer
                But the ultimate determiner of whether or not a particular worker was truly an independent contractor or an employee entitled to unemployment benefits will be the state bureaucrats and/or the courts, if the worker decides to contest the issue. An employer can have a worker sign an "independent contractor" agreement, and issue form 1099 for the payments to that worker, but if the state decides that the worker was not truly independent, the state can and will come after the employer for unpaid unemployment taxes, payroll taxes, and penalties. So a worker that the employer wanted to characterize as an independent contractor, and filed form 1099 for, might ultimately be ruled an employee by the state tax authorities or a court.
              • Re: 1099 Labor
                BizOptimizer Adventurer
                Regardless of the intracacies of the law, and of course all paperwork you have to the contrary helps, but it is my understanding that a "contractor" can not pay taxes - tell the IRS he was an employee and guess who they are going to come after for the money?

                That is why many big companies even pay their contractors on W-2 so they are ENSURED the taxes are paid and they won't have to pay them again down the road. Hope this helps.