Youdecide Assignment: Independent Contractor or Employee

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“Misclassification: IC vs. Employee”

The consequences usually depend on IRS. In this situation, ABC Utility has to fulfil all the legal requirement otherwise Karen has an authentic case against ABC Utility to claim her loss. For instance, social security, tax according to Federal laws, Medicare, and any other benefits which are applicable for the Karen. Additionally, 401k, overtime pay, employee benefits including vacation, holiday, and sick pay (IRS, 2012). Moreover, unemployment compensation tax, and worker’s compensation insurance. To misclassify the employee as independent contractors is crucial matter. ABC Utility should resolve this issue with the support of tax advisor and should pay all the holdup amount. If the case go to court then company will have to pay all the forfeits including the lawyer fees.

“Practical Parameters”

There are certain points which should be considered in an independent contractor agreements, to avoid any concerns on misclassification.

Titles & Names:

In agreement, proper titled should be mentioned with the particular requirement of the job task, and should specify time duration. It is important that in the document don’t mention the independent or individual contractor as an employee.

Time duration:

The time duration for an Independent contractor should be limited up to six (6) months. After 6 months, if the person still continue with same service will be considered as employee.

Pay/Compensation:

Periodic (hourly, weekly, or monthly) payments should be prevented. Payment should be made on the basis of completion of the task or project.

No trainings & meetings:

There is no requirement to go through any training programs for the independent contractor, and they don’t have to attend any employee meetings, since they are on contract.

Submission of Reports:

There is no requisite of submission of written or oral reports on regular basis in the independent contractor.

No direction and no control:

The independent contractor will be permitted to perform his/her task. The service will not be controlled by the employer for instance how to execute and what to implement? The measure of control and independence will be pondered in an independent contractor.

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References

Bennett-Alexander, D., Hartman, L. (2012). Employment Law for Business, 7th Edition. McGraw-Hill Learning Companies. New York, NY.

Employee vs. Independent Contractor - Seven Tips for Business Owners. (2012). Retrieved from IRS: http://www.irs.gov/uac/Employee-vs.-Independent-Contractor-%E2%80%93-Seven-Tips-for-Business-Owner

IRS 20 Factor Test – Independent Contractor or Employee? (n.d.). Retrieved from Oregon.Gov: http://www.oregon.gov/ODA/shared/Documents/Publications/NaturalResources/20FactorTestforIndependentContractors.pdf

Tomlinson, N. (2013, September 20). 20 Ways Your Independent Contractor Might Be an Employee. Retrieved from Lorman: https://www.lorman.com/resources/20-ways-your-independent-contractor-might-be-an-employee-14893