Overtime / mileage for Contractors?

[infocus]

What is the name of your state? CA

In California, are there any laws pertaining to overtime for contractors? We do not have any employees, but only use contractors. They write their hours and submit timesheets and we pay them based on those.

Now the contractors are saying that any hours after 40 in a week is overtime, including work on weekends, after hours, etc. Also they say the I.R.S. mandated reimbursment for driving is 44.5 cents/mile.

When do we have to pay overtime, if at all? When do we have to reimburse them for miles driven? Is there a website that details the general laws for hiring contractors in CA?

Lastly, the contractor claims that they need to be paid in full every time on the first of the month. But our contractor agreement says we have 30 days to pay them. Who is right?

 

[pattytx]

If these workers are legitimately independent contractors, the Labor Code does not apply. That includes overtime, business expenses (including mileage) and anything else that relates to "employees".
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Everything should be spelled out in the IC agreement.

And even if they WERE employees, the "IRS-mandated mileage rate" is NOT a mandate. It's the rate above which any reimbursement is taxable. Period.

 

[infocus]

Great reply. The key point you mentioned is if they are legitimate contractors.

The "C"-right to control the work is probably the primary characteristic of an employee-employer relationship. In our case, we have a repair shop: We tell the contractor what time to be at our shop, he uses our tools (and sometimes his) but we don't tell him how to do the work. He submits a timesheet which shows the hours and the jobs that he worked and we pay him based on that.

Are we doing things correctly? How can we set up the relationship so that we can avoid any problems?

Thank you!

 

[eerelations]

I think you're on shaky ground here.

 

[infocus]

What does that mean?

 

[justalayman]

What does that mean?

It means that it sounds like you may have employees rather than IC's.


Did you visit the weblink from pattytx?

 

[infocus]

Yes, of course, I visited the link; however, it is still not 100% clear. That website link is very vague.

Is there anyone here who we can PM who we can describe our business to? We need some kind of audit to determine if we should be employers.

If anyone here is reading this and think you can be of service, please message me. I am happy to pay you a modest fee for your time in helping us determine this.

Thank you!

 

[anteater]

Yes, of course, I visited the link; however, it is still not 100% clear. That website link is very vague.

Is there anyone here who we can PM who we can describe our business to? We need some kind of audit to determine if we should be employers.

If anyone here is reading this and think you can be of service, please message me. I am happy to pay you a modest fee for your time in helping us determine this.

Thank you!

Why not go straight to the "horse's mouth"? The IRS and Form SS-8.

http://www.irs.gov/pub/irs-pdf/fss8.pdf

 

[justalayman]

Why not go straight to the "horse's mouth"? The IRS and Form SS-8.

http://www.irs.gov/pub/irs-pdf/fss8.pdf

That's the form number I was looking for.

Now as to why??
because if they fill this out and all those "contractors" actually turn out to be "employees", the OP may have a big tax bill to cover when the IRS wants the back taxes for those employees. But it is better to correct it now rather than later. It seems as the natives are restless and won't be quelled. The employees, I mean contractors, may take it upon themselves to contact the appropriate agency to initiate an investigation into this themselves.

Other than that, none I can think of.

 

[infocus]

Okay, great advice guys. I also found an EDD form that is similar, which is form DE 1870.

But how about an independent audit, is there anyone here who understands the criterial thoroughly and is willing to audit us?

 

[justalayman]

I'm not sure the IRS understands it well enough to make a rock solid determination. It's just that their determination is the one that counts.

All in all it seems to be a very elusive definition.

 

[infocus]

YES! It is elusive. But who is better to submit the situation to, the IRS or the EDD? Does it matter in the end?

Still looking for third party counsel.

 

[pattytx]

I'm sorry, but it's not elusive at all. If it were, thousands of employers across the country would not be properly classifying their workers. The more of the criteria the worker meets, the more likely he is to be an employee. "Right" to control is critical, even if the company does not exercise that right. Also key is the worker's risk of financial loss and opportunity to make a profit (other than just his hourly payment).

 

[eerelations]

I agree with Patty on this - these guys of yours are almost definitely employees, not contractors. Based on the information you've provided, I'd say the probability of this is about 99%. That's what I meant when I said you're on shaky ground here.

I have conducted several (at least four) independent audits of the type you're asking about, for both Canadian and American companies (Canadian and American independent contractor vs employee laws are almost identical). As well, I have facilitated more than 40seminars on this subject to owners and managers of American and Canadian companies. So I'm very well versed in this topic.

Before you ask, no, I won't audit your firm - because I don't have to. Based on the information you've provided, these guys are indeed employees.

 

[infocus]

Since you are both so versed on the topic, what makes them employees in this case?

Do subcontractors HAVE to be paid per job, why can't they get paid by the hour?

If we have employees and want them to be contractors, what do we have to do? In other words, what is a scenario that would past the test for contractor status?

Thanks for your informative wisdom. We are trying to learn so we can do the right thing.