Julie:
My first bit of advice to you which overrides everything else I will say
about this matter is this: Get a competent attorney who is skilled in
employer - employee contracts. Do not attempt to practice law yourself
and take whatever advice you receive (including mine) with a big grain
of salt. Even thjough all of us contractors have been involved in some
aspect or other of the issues regarding contractor versus permanent
employee status, we are all amateurs as far as the legality issues are
concerned. If you attempt to practice law yourself, you can get burned.
Big time, too.
Now with that disclaimer out of the way, here is my opinion as an
amateur on the subject.
When this lady first came on board, one of the first issues would be
regarding employment status. This would be an either or case. Either
you set up remuneration on a 1099 basis for her, or else you set her up
as your employee on a W2 Basis. If it is on a 1099, all your agreement
can say is that you are engaging this person on a subcontract basis,
with the prime contract being between you and your client, and the
subcontract being between you and this lady. No contractual
relationship should exist directly between your client and this lady you
have engaged. You are not obligated to pay unemployment insurance,
employer social security contribution, or workman's comp. The matter of
temp to perm thus becomes a clause which merely states that the client
has the right to negotiate with your contracted person at some time in
the future. Should you end this contract with your contracted person,
this person could file for unemployment if she wishes, but you would not
be the last employer of record. The last organization that used her
services on a W2 basis would. Quite possibly, this person would never
be entitled to receive any unemployment compensation because she worked
beyond any period in which any employer would be responsible. Thus, the
1099 has some salvation for your organization in that it removes you
from any unemployment regulation.
Now, if you chose to EMPLOY her and negotiated an Agreement to that
effect, you would be responsible for witholding all appropriate taxes,
maintaining unemployment compensation contributions, and all over
overhead that comes with an employee except involving her in your fringe
benefits package. If you terminate her employment, the reasons for such
termination must be between you and her, not between her and your
client. If she has done such things as falsify timesheets, falsify
expense reporting forms for which you reimburse her, or act in an
insubordiate manner to you as her employer, you can terminate her for
cause and this will deny her any unemployment benefits. If, however,
your client asks you to remove her because things have not worked out,
she is still your employee. All that's happened is that your client
does not want her around. It thus remains for you to examine your
current available job openings and see if there is anything else you can
send her out on. If there isn't anything else, you can terminate her
for lack of work, which begins on the day your client suspended her
contract. She then has the right to file for unemployment on the day
her income became suspended. Unfortunately, your unemployment
compensation liabilities thus kick in. All you can do is hope and pray
she finds other work as quickly as possible.
The temp to perm stuff thus becomes irrelevant. That only becomes a
factor when the time comes for you to engage with your client in
negotiations to allow her to become a perm employee of your client.
I hope this helps ........but remember, this is not legal advice, and
should be taken as only an opinion. I will now get off my legal soap
box and return to getting some EDI mapping done......
Cheers
Bob Carper
> Julie Ballantine wrote:
>
> I need your help. I have been contacted by the Employment Development
> Department. They are auditing my company in about 3 months. Here is
> the situation:
>
> My company provides consulting, contract-to-hire, and direct placement
> services to companies in need of EDI or EC related consultants.
>
> We sent a consultant (1099), name not mentioned, let's just call her
> Graceful, to a company on a "contract to hire" basis. This consultant
> signed a contract that clearly stated she was an independant
> contractor, and not an emplyee. After 3 months, if the company liked
> her, they were going to hire her. The problem was she did not perform
> her job functions, as she indicated she could during the screening
> process, and I had to let her go - at the request of the client.
> Then, she submitted a request for Unemployment insurance at the EDD.
>
> Her benefits were in question because my company responded back
> stating that her contract clearly stated she was an independant
> contractor, not an employee. We sent EDD a copy of the contract.
> This caused the contractor to call EDD and state that she "didn't
> understand her hiring terms and thought she was an employee". How
> many of us DONT read our contracts???? Her confusion caused the EDD
> to investigate and ultimatly classify her as being an employee of my
> company. They determined this because of the terms of the work
> environment: on-site, at "my clients" office. I can understand that
> this type of contractor would be classified as a "employee". An
> independant contractor works when they want and where they want. I
> can agree with the contract to hires as beign classified as W2.
> Fine.
>
> Now, the EDD is auditing us to make sure we dont have any other
> "misclassifications".
>
> The big question I have here is this. I have other "independant
> contractors" that work out of their offices, on their own time,
> receive other income, and work with their own equipment that I do not
> provide. I had explained circumstances, and the EDD stated that
> because they are doing work for my client and I am paying the
> "consultants", they are classified as W2 employees also. I disagree
> with this. What are your feelings on this? Do you know of any
> resources that can help me prove the "Independant contracotr" vs. the
> "Employee"? Has anyone else gone through this - win or loose? I am
> going to fight this until the end.
>
> Thanks for your input on this.
>
> Julie
>
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