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Sales Executive Wife is being moved from salaried employee to commission-only independent contractor due to Covid-19 cost cutting. Is she entitled to

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Bluto

Junior Member
What is the name of your state? TX

This afternoon my wife received a call from HR, followed by an email with a "Elimination of Salary/End of W2 Employment" notification. Due to their business being impacted by COVID-19, they have had to make several immediate cutbacks, including layoffs.

As she is in sales, rather than a complete layoff, they have offered to switch her to a 1099 commission only role, effectively continuing on as usual but now without salary and medical benefits. Salary to date and unused PTO are being sent out next week as a check and medical benefits end at the end of the month (the worst possible time to be without health benefits, surely?!).

My question is even though she maintains the 1099 position, is she still legally entitled to claim unemployment as her salary and employment were technically eliminated? And should we be asking the company to provide severance, or are they legally allowed to not offer this in lieu of the 1099 agreement? She has a few lingering commission payments due to come in over the next couple of months before income dries up completely. She doesn't expect to begin or close any deals during the next few months either as nobody is currently buying. On top of this, I understand she cannot file unemployment because she is now an independent contractor.

We've never really been in this strange limbo position of "laid off but not technically laid off" before. I guess this also means she is free to pursue employment elsewhere while keeping this contractor gig as long as there isn't a conflict of interest, is that correct?

Any help is greatly appreciated. We're feeling the effects of the virus already.
 
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LdiJ

Senior Member
What is the name of your state? TX

This afternoon my wife received a call from HR, followed by an email with a "Elimination of Salary/End of W2 Employment" notification. Due to her business being impacted by COVID-19, they have had to make several immediate cutbacks, including layoffs.

As she is in sales, rather than a complete layoff, they have offered to switch her to a 1099 commission only role, effectively continuing on as usual but now without salary and medical benefits. Salary to date and unused PTO are being sent out next week as a check and medical benefits end at the end of the month (the worst possible time to be without health benefits, surely?!).

My question is even though she maintains the 1099 position, is she still legally entitled to claim unemployment as her salary and employment were technically eliminated. And should we asking the company to provide severance, or are legally allowed to not offer this in lieu of the 1099 agreement?

We've never really been in this strange limbo position of "laid off but not technically laid off" before. I guess this also means she is free to pursue employment elsewhere while keeping this contractor gig as long as there isn't a conflict of interest, is that correct?

Any help is greatly appreciated. We're feeling the effects of the virus already.
The company is really playing dirty here. I am not sure what to advise. I think that what they are doing is flat out misclassifying employees and I am not sure that your wife should go along with it. However, if she does, when tax time rolls around next time she can include Form 8919 on your tax return to try to force the employer to pay their half of Social Security and Medicare taxes, and she can file an SS-8 with the IRS to ask them to determine that she was an employee rather than a contractor.
 

cbg

I'm a Northern Girl
Severance is not required by law in 47 states, including Texas, under any circumstances short of a legally binding and enforceable contract that says otherwise. In two of the three remaining states, it would not be payable by law in this situation. I don't recall the parameters of the third state's requirements.

She is ALWAYS free to apply for unemployment. There are no situations where she is legally barred from applying. The state will decide if she qualifies. There is absolutely nothing to be lost in doing so - there is no penalty for being wrong and the worst that can happen is that she is denied, in which case she is no worse off than if she didn't apply at all.
 

adjusterjack

Senior Member
We've never really been in this strange limbo position of "laid off but not technically laid off" before
There is no limbo. She's been fired from one job and offered another, for much less money. One option is to refuse the 1099 offer because of the income disparity and immediately file for unemployment compensation.
 

commentator

Senior Member
She needs to go home officially, stop selling, stop working, quit the job and file for unemployment. (Provided she can get into the system. If she has trouble doing so, she needs to keep detailed records of when and how many times, etc. that she did try. )

This is illegal, unacceptable behavior from (what a surprise) bad people who are out to screw over their employees, and this company is really playing dirty, as someone else has pointed out.

She wouldn't be making any money on commissions selling anyway, as nobody is out there buying at present. If she accepts the 1099 position, without health care or benefits, there'll be no upside to it, even to the point of that she very likely won't qualify ever for unemployment at a later date because they still had work for her, and "that's what her job was, (commission only, no benefits) so she wasn't justified to quit."

Ever, even if, at the end of the virus panic, she asks for her old situation back, and the company refuses, this new 1099 job will be considered her job. At the present time, I suspect there will be NO adjudication of problem unemployment claims as the system explodes, and she has a pretty good chance of being approved for unemployment immediately, or very soon. And you need to get away from this sucker anyway. This is a nasty bad way to try to continue to profit and cut expenses during the hard times!
 

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