This is a new feature where we take a workplace or HR-related question sent to us by a TLNT.com reader and ask members of our TLNT LinkedIn group to give us their opinions about it.
What do you think? Do you agree with the responses here, or do you have a different perspective? Please, let us know by leaving you response here, and feel free to send questions to john@tlnt.com, or post them on the TLNT Linked in group.
DEAR HR PRO: I am a paralegal and have recently been hired to work on a project at a law firm. They have told me they will pay me monthly and will submit a 1099 at the end of the year. I don’t think I’m an independent contractor and don’t want to have to go through the complications of filing taxes quarterly. I do the work at their facility, with their supplies, under their direction and supervision of attorneys, at the hours determined by the firm. Am I a common law employee or truly an independent contractor? I have never worked contract before, and I am looking for permanent employment. I do not know how long the project will last so how can I file estimated quarterly taxes? I may be working on the project one month or six months, I don’t know.
Here are some of the responses we received from managers, executives, and HR professionals:
- “I don’t know what state this person is, and state law may affect the conclusion, but at least under Pennsylvania law this person is probably *not* an independent contractor.
There are about a dozen criteria that courts examine when evaluating whether an individual is an employee or an independent contractor, and these also vary by which statute or law is in play (whether tax codes or anti discrimination laws or ERISA, etc.) These criteria, which are not exhaustive, are outlined in the U.S. Supreme Court case Nationwide v. Darden (1992), and can be “crystallized” into three basic categories:
- Characteristics of the relationship relating to compensation and benefits;
- Characteristics of the relative position of the parties in the marketplace; and
- Characteristics of the task/job being performed.
Certainly payment on a 1099 with no offer of benefits would fall under the first set of criteria, and indicate “independent contractor.” But many employers seek to avoid employment tax expenses and workers compensation premiums by paying employees on 1099’s. The implications for not only the employer but also the employer’s accountants can be quite unpleasant if they’re wrong.
The fact that the person is working solely with the employer’s tools, at the employer’s location, on the projects assigned by the employer, on the schedule dictated by the employer indicates overwhelmingly an employee. (That’s the third set of criteria).
As to the second set, the ‘marketplace’ analysis, if the individual is not free to work for anyone else; if the individual does not typically free-lance out as a paralegal but is only working for this entity, and if the entity is a law firm, not a “temporary agency” or entity that assigns out free-lance paralegals, the second set of criteria would strongly indicate employee, not independent contractor.
On balance, I believe this individual is an employee, and the law firm using him or her is taking unfair advantage — but it is also commonplace among small firms to misclassify its employees as independent contractors — both lawyers and paralegals alike.” — From Harold Goldner, of counsel at Kraut Harris P.C. , in the greater Philadelphia area.
- “(This) person is not an independent contract based on the facts given. In my opinion, almost none of the tests for IC status have been met. Check the IRS web site. They have tons of stuff on this.” — From John Jorgensen, SPHR and State Director at Illinois State Council of SHRM, in the greater Chicago area.
- “I agree with my colleagues. Based on the information provided, the individual is really an employee. Something to keep in mind: if the individual someday wants to challenge the classification: keep track of the hours worked each week. The Department of Labor’s Wage and Hour division has issued an opinion letter that states that generally, paralegals aren’t considered exempt, so they’re entitled to overtime. The person may some day be entitled to overtime pay.” — From Susan Meisinger, SPHR, JD, and Director at National Academy of Human Resources, in Washington D.C.
Got a question for “Ask the HR Pro?” Send them to john@tlnt.com, or post them on our Linkedin TLNT group. This is for informational purposes only and is not intended to be taken as a legal opinion or legal advice.