Independent Contractor Question/Issue

[MichiganBob]

What is the name of your state (only U.S. law)? Michigan

A large corporation I do work for has hired a third party and a law firm to determine if IC's that work with them meet the IRS criteria for IC's. If you do not pass the test they (the third party) will recommend that the relationship be severed.

I feel that I have little to worry about (I only work for them about 40 days a year, using my own equipment, in my own facility, no benefits, etc) but I feel that the questions they are having us answer (it states that we will perjur ourselves if we don't answer truthfully) are an invasion of privacy. We have to answer yes or no to about 40 questions relating to how our business are set up including listing our other clients. If I refuse to fill it out I fear repercussions (being assumed guilty and losing the work I do for them).

I used to work at this company and they have avoided hiring by keeping Temps and IC's on staff for over ten years in some cases. It seems that we never get a break. They forced people to work as IC's and temps because they didn't want to pay benefits and now they can't work with those people because they are afraid of IRS repercussions. They avoid penalties but the little guy suffers the consequences yet again.

Thanks for your help.What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[justalayman]

so, what are you after? They don't want employees and only want IC's. If they can run their business in that fashion, that is their right.


especially as an IC, you are not required to fill out anything. If you don't wan't to, don't. It is the company's choice to continue your relationship or not.


and unless you are filling out some government form, there is no perjury concerns.

Not sure if I answered your question or not because, well, you didn't ask one.

 

[pattytx]

Agree. Nobody is forcing you to work for this company. If they want to work primarily with ICs, then they want to reduce the risk of a misclassification by getting information from you about whether you actually DO work for other companies, how you go about your work (they're not apparently directing your work methods).

You don't want to meet their requirements, then work for somebody else.

 

[MichiganBob]

That's the issue. I don't want to loose their work, but I feel that the questions they are asking are overly invasive. I provide a service for them when they request it. They have no more right to acquire personal info from me than I have to request personal info from them. The dilemma to me is that their request to comply with this is something you would request from an employee not from another business owner.

They have over 4000 employees. I know what they are doing. Their plan is to force IC's who they "feel" (that's the term the Staffing company uses) are borderline to work through the staffing company.

Also, (justalayman) how could they run a company with just IC's legally. They are the ones looking for loopholes not me. If 100% of my work came from one company, but I ran my business operations totally independantly, that would simply be a risk on my part. Many auotmobile car parts suppliers did this with the big three. Many eventually paid the price , but it was their choice. Is the IRS/Government going to start meddling to the point where they tell businesses that they must have a certain number of customers and no single customer can comprise more than 50% of gross billing? People are simply trying to support their families.

 

[tranquility]

That's the issue. I don't want to loose their work, but I feel that the questions they are asking are overly invasive. I provide a service for them when they request it. They have no more right to acquire personal info from me than I have to request personal info from them. The dilemma to me is that their request to comply with this is something you would request from an employee not from another business owner.

I could ask you anything I wanted to and ask you to pee in a cup and stand on your head and have sex in public (Well, maybe not that one if a court found it to be against public policy.) before I contract with you. You have the right to refuse, but, then I have the right not to hire you. You can certainly request personal info from them. I suspect they will refuse and you will not form a contract with them.

Their plan is to force IC's who they "feel" (that's the term the Staffing company uses) are borderline to work through the staffing company.

Excellent plan. It helps assure their business practice is legal.

Also, (justalayman) how could they run a company with just IC's legally.

Lots of ways.

They are the ones looking for loopholes not me.

It's not a loophole, it's the way the law is designed to help businesses remain flexible by hiring workers as needed.

 

[Some Random Guy]

We have to answer yes or no to about 40 questions relating to how our business are set up including listing our other clients.

The purpose of these questions is to validate that you are an IC in the eyes of the IRS. Most multiple choice or true/false questions shouldn't raise too many privacy issues.

However, if they are asking you to list other clients and the amounts of billing for each one, I would be as vague as allowed. For example,

"MyCompany has over 20 recent clients, the identity of which is confidential trade secrets. YourCompany accounts for less than 25% of MyCompany's billed invoices for 2010."

Then run this by their lawyers to make sure that your answers are acceptable to them. So long as your organization is not a wobbler in terms of IC/employee rules, I would expect that the lawyers would not want to spend a lot of time haggling over seeing your client list.

 

[tranquility]

SRG makes a good point. Just because they ask you specific questions does not mean you have to answer them in that way. As with all contracts, negotiation of what information is exchanged could be a part of it.

 

[MichiganBob]

I have not filled out the form yet but i did email the corporate HR person my concerns and asked to be removed from the list.

I also understand that the second phase involves multiple additional documents including criminal background check, access to tax records, SS# and other private information. As well as a slyly worded document that seems to imply that our services will will now be monitored by this third party staffing company. Isn't this a conflict of interest that a staffing company can determine if IC's are legit and then force them to offer their service throught that company. Fox in the hen house.

The issue here is companies are hiring IC's and Temps in order avoid hiring employees. Keeping them on staff for years or even decades in order to avoid paying taxes and benefits. Getting called out on their greedy and illegal behavior and then dodging the responsibility by throwing everyone under the bus. If they had hired workers properly to begin with this would not be a problem now.

 

[pattytx]

First of all, employees of a staffing agency are exactly that, employees. The client company pays a hefty upgrade as a percentage of the worker's actual hourly rate to cover benefits, including employer taxes, worker's comp, sometimes holidays, sometimes even medical and dental insurance. This is not the client/company avoiding anything.

Secondly, if the company wants to be confident about their classification of ICs, they can do so. When you own your own business, you can make that decision about how YOU run YOUR business.

 

[MichiganBob]

Pattytx, It is if the company in question keeps IC's or "freelancers" on staff for 5-10 years that are not affiliated with a staffing company.

 

[MichiganBob]

I wanted to add that, as a business owner for ten years ( I was incorporated until 2 years ago) I have hired many Independent Contractors to work on projects. I hire them for 1-5 days on average to work on a specific project. I hire them based on my past experience working with them, recomendations from others I respect and how competitive their rate is.

I have never once asked them to submit to a background check or a drug test. Or have asked for any information regarding who they work with or if they paid their taxes. That's their business. They provide a service and an invoice with EIN or SS# I write a check. Any more than that and I am at risk of treating them as an employee.

 

[justalayman]

Pattytx, It is if the company in question keeps IC's or "freelancers" on staff for 5-10 years that are not affiliated with a staffing company.

Irrelevant. As long as they operate as IC's (and a freelancer that is not affiliated with a staffing company is an IC), there is nothing illegal about this. I know construction companies that sub all of their work to other companies (IC's). They are essentially a company that does no actual work but bid on jobs and then sub out the work. The only employees they had were their office personnel. It is basically a construction management company where all of the contractors are contracted to them rather than the customer/building owner.

I have never once asked them to submit to a background check or a drug test. Or have asked for any information regarding who they work with or if they paid their taxes. That's their busines

Well, considering that a GC/employer can often be held liable for the acts of his subs, I would say they have very good reasons to ask for most of the information you are being asked about.

 

[MichiganBob]

Justalayman, so you are saying the company is wrong then for doing this. They are going through this entire charade because they fear the wrath of the IRS telling them that all of those IC's were actually employees and are owed back benefits.

 

[pattytx]

You have GOT to keep the IC status separate from the workers who are employed by a staffing agency. Two. Separate. Things.

 

[justalayman]

No I am not saying they are wrong. There are companies that subcontract all of their actual work. There is nothing wrong or illegal about that.

what kind of company are we talking about. It would be easier to speak to the issue if I knew the situation. Are these outside workers coming in and doing work on the main employers premises or are the workers doing work outside of the company's premises? Are these people directly involved with customers?

In either case; I would not want somebody that does drugs working for me whether it be on my premises where I had to worry about them being injured on my property (which I might be liable for) or if they deal with customers outside and off my premises where again, I may be liable for certain situations both to the worker and the customer.

Same thing with a background check. I wouldn't want Jack the Ripper working on my premises or with my customers off the premises. There is a possibility of me being liability for certain situations that may arise.

Who they work with: birds of a feather? I agree that they are not entitled to know who my other clients are or what contracts I have with them. Whether they pay their taxes or not; well, about the only thing I can see with that is it shows character and it let's me know that the IRS probably isn't going to try to garnish my payments to you.