I think I'm being blackmailed by worker

[woofshark]

I think I am being blackmailed.


I own a business in the state of Florida and recently had to fire an incompetent employee. The employee got paid both hourly and a percentage of sales as commission. The firing was indeed justified, and this is not the matter being contested. A couple weeks after the firing, I get a letter from this person saying they think they are owed $1500 for a number of reasons including mysterious commission sales, gas and vehicle costs, etc. I do no have a problem with this part, and am more than happy to sit down with the ex-employee and figure out if there was an unfairness. I keep ALL sales very well documented.

However, after explaining this in a response to her/him, the ex-employee responded in a second letter, demanding an arbitrary, unfounded, and undocumented amount sum of $1000 *or else* he/she will report me to a number of state and federal agencies for cutting some corners with my business, including not paying payroll tax or documenting the employee. It is true, I have not paid this tax because of very large grey area in Florida law with commission sales. I thought I could technically claim him/her as a independent contractor. But even if this is not the case, and I have to pay the owed money, isn't this still extortion? The payroll tax has nothing to do with him/her or his/her "owed" commission. She was fired and therefore does not qualify for unemployment.

So in short, is it blackmail if an ex-employee demands an arbitrary amount of money (that they feel they are owed) *or else* they will blow the whistle on my shaky business practice of not paying payroll tax? They are unwilling to negotiate the amount of money that is supposedly owed. He/she is basically demanding shut-up money.


I am leaving as much detail out of this as possible in order to maintain security of this matter, just let me know if there is any other vital information that is needed and I will be happy to provide it.

 

[Beth3]

But even if this is not the case, and I have to pay the owed money, isn't this still extortion? Yep. The problem, however, is that it appears he may have you over a barrel.

I thought I could technically claim him/her as a independent contractor. Under the various applicable laws, it is quite difficult to have an "employee" meet the definition of an independent contractor. Obviously there's not enough information in your post to know one way or the other but the odds are considerable that this individual was an employee and not an IC.

If I were you, I'd get my business attorney or tax expert to advise me on the applicable IC laws and taxability of sales commissions and if you have been in error, rectify that immediately with the State. Then you can tell the ex-employee who is trying to extort money from you to go pound sand.

BTW, even if you didn't have an attempted extortion situation on your hands, you don't want to mess around with this IC and payroll tax issue. If you get audited by the State or feds, you could be looking not only at paying past due taxes but substantial penalties and interest.

 

[Antigone*]

I think I am being blackmailed.


I own a business in the state of Florida and recently had to fire an incompetent employee. The employee got paid both hourly and a percentage of sales as commission. The firing was indeed justified, and this is not the matter being contested. A couple weeks after the firing, I get a letter from this person saying they think they are owed $1500 for a number of reasons including mysterious commission sales, gas and vehicle costs, etc. I do no have a problem with this part, and am more than happy to sit down with the ex-employee and figure out if there was an unfairness. I keep ALL sales very well documented.

However, after explaining this in a response to her/him, the ex-employee responded in a second letter, demanding an arbitrary, unfounded, and undocumented amount sum of $1000 *or else* he/she will report me to a number of state and federal agencies for cutting some corners with my business, including not paying payroll tax or documenting the employee. It is true, I have not paid this tax because of very large grey area in Florida law with commission sales. I thought I could technically claim him/her as a independent contractor. But even if this is not the case, and I have to pay the owed money, isn't this still extortion? The payroll tax has nothing to do with him/her or his/her "owed" commission. She was fired and therefore does not qualify for unemployment.

So in short, is it blackmail if an ex-employee demands an arbitrary amount of money (that they feel they are owed) *or else* they will blow the whistle on my shaky business practice of not paying payroll tax? They are unwilling to negotiate the amount of money that is supposedly owed. He/she is basically demanding shut-up money.


I am leaving as much detail out of this as possible in order to maintain security of this matter, just let me know if there is any other vital information that is needed and I will be happy to provide it.

My suggestion is to file a police report for the alleged blackmail and then correct your shady issues. Be ready to take your licks.

 

[Digger206]

Beth3 is right. The other thing you have to consider, is that if you consult with qualified professionals (attorney, accountant) and notify the State that you may have improperly (and unknowingly) fallen short on compliance with the legal requirements, they are less likely to hammer you.

As far as the extortionist, do you really think you'd pay the $1,000 and she'd just go away ? Ever gone fishing and gone home satisfied with just one fish ?

Here's what I suggest. Get the State involved with a voluntary audit to determine whether there are inconsistencies in reporting. Send the extortionist a "polite" letter, (certified mail) explaining that you appreciate them bringing this to your attention and that you'll be contacting the State to request an audit and correct any errors in reporting.

Tell the lady that you'll also provide the State with copies of her correspondence. (The "State" would be the Police, whom you should immediately call to file a criminal report.) Advise her that the State will audit her payroll issues as well, and upon completion, if there are any monies owed, you will rectify that forthwith.

Don't re-visit the extortion of the $1,000. Just turn the tables on her. Any taxes found due were due anyway, so there's no loss there. Fines, if any, most likely won't exceed the amount being extorted. I would guess that the State would be much more lenient if you go knock on their door first.

 

[tranquility]

Any taxes found due were due anyway, so there's no loss there. Fines, if any, most likely won't exceed the amount being extorted.

If the company is of any size, penalties will be far more than the $1000. That does not change what the OP should do, I'm just saying.

 

[commentator]

I am suspecting from reading this post, that the employer may be muddied up with unemployment taxes. I would suspect that this employee filed for unemployment benefits after being fired. "She was fired, and therefore does not qualify for unemployment benefits" is really not always the case. In any case, she certainly has the right to file, and has doubtless filed as this is the first thing everyone who is fired is counseled to do. When she was determined to be monetarily ineligible due to having been paid as an independent contractor, she decided you were doing something sketchy, and has jumped on this bandwagon that she will report you and all that jive. I agree with everyone else, Paying her would be incredibly stupid for many reasons. I sort of like the idea of reporting the extortion to local law enforcement.

One reason is that you probably owe the money anyhow, you can be caught up in doing this at any time, and if your employee has filed for unemployment benefits and been denied, and it appears that you may have misclassified your employees and failed to pay in unemployment taxes, then they are probably about to do an examination of your situation anyway, whether this person files complaints, reports you or whatever she is threatening to do. So you have absolutely nothing to gain by paying her anything. She won't go away and even if she does, the situation won't.

Florida does have very light least possible requirements as to who must pay unemployment (payroll) taxes and who can be classified as a contractor, and they usually don't slap you with big old fees if they determine that you are misclassifying employees. They sort of just slap your hand and you plead ignorance and try to do better. As I said, it's a very employer friendly state. And they have SO many of those time share selling deals and such sales things going on there.

And even if unemployment insurance is not the only issue at stake here, once you get flagged in the state system for not paying some of the required things, or for misclassifying employees in some ways, then you'll probably be followed up on by all of them. As I said, all this person had to do was file for unemployment benefits, which I suspect she has done, and the whole thing comes to light, whether or not she rats you out any further or not at this point.