Viewpoint - Viewpoint

I have never understood why anyone in our industry would consider going the "contract" route.  Maybe someone can explain the logic?

What I am discussing are those individuals who are asked by their “bosses” to create a “fictitious” independent contractor company,  when one really doesn’t exist so that they (the boss) can bill them,  (the employee/contractor) - contractor to contractor.

The "boss" will then  subsequently 1099 the Employee / contractor -therefore attempting to avoid employment obligations; State and Federal laws that protect protect the employee / contractor;  and attempt to  save the cost of employment taxes therefore needlessly  putting all of the tax burden on their employee / contractor.

They then continue to treat the “contractor” as an Employee.. This also includes the  "contractor" who is working from a home office.   The companies will pay for the contractors expenses, travel, equipment; the contractor has a boss to report to; must attend meetings; will promote themselves as a "contractor" for the said client; the client will pay even for the training for the employee..

The other options that Employers may use is to call the employee a contractor so they can avoid paying them overtime, or their witholdings; but treat them as an employee.. They believe that even though they allow the individual to work from home that would classify the employee as an independent contractor.  They don't understand that both the IRS and the DOL have specific criteria that determines if an individual is an employee and not a contractor, and 9 times out of 10, the employee is misclassified.

Even though they are 1099'd the clients that the contractor represents are actually Not THEIRS but their "bosses" – and of course their "boss" controls what they do, when they do it, how they do it, and even Who they do it for or with.. the “contractor” like an employee doesn’t determine their own hours; his or her own work schedule; are not free to work for several other clients; will use their bosses software, equipment or materials; they will attend  Employee functions.. have assigned emails, passwords, phone numbers, are listed in the company directory, receive recognition.. (all the elements of an Employee)

They have all the elements of the employee, but they are being robbed from so much income.. Not to mention health benefits, social security, Unemployment Insurance, medicare, overtime, wrongful termination protection, vacation pay, sick pay, workers compensation,  disability insurance,  termination pay, paid leave of absence and so much more.

An interesting observation,  let’s use this example -  A Contract Recruiters who is 1099’d making about  $100 an hour is actually making less than the individual who is W2’d and making say $70 an hour

Why? well because Your "client" / boss,  isn't matching your Workman’s comp, SSI, FICA,  Taxes, Unemployment,  (state and federal) - Not to mention that billing yourself as a self employed contractor, that you are now in a higher tax bracket. - If you are being matched, then you are NOT a contractor but an employee. (temp employee maybe, but employee none the less)

• As a contractor, you don't qualify for any benefits; stock options; 401k, or any perks that the "employees" are getting.. If you are receiving them, then your "client" is misclassifying you.
• As a contractor you have to pay for your own expenses, and suffer your own profit and loss.. as legally your Client is not to be paying for them.. (if they are you are misclassified)
• As a Contractor if you lose your job, you lose any chances at unemployment or social security benefits. Hurt on the job, no workmans comp.
• A contractor Has no boss and the general rule is that the client only can Direct the RESULT of the work done by the contractor - not the means, or methods in getting to the final results
• A contractor doesn't attend meetings, follow procedures, rules, and they can do what they want, when they want, because they want to.. and don't have to ask permission to do so..

Which then ultimately means a contractor in the official true sense is a self employed individual

Hence my confusion, if one wants the "security" of a job, and paycheck, then why would you consider self employment?

Recruiters, H.R, Sourcers, Researchers, etc are non exempt which means that qualify for overtime. Even if they telecommute and work from home.. and this also figures to the individuals who were asked to "open a company" so that their "boss" could bill them contractor to contractor -- I call that putting lipstick on the pig..

This even means the True Blue w2 contractor (temp employee). Now if you are being 1099 and asked to work overtime, then there is more than a high possibility that you are being misclassified, and may want to consider questioning all the above..

FYI Employee Misclassification increased a huge 77 Percent in just the first HALF of this decade, and the litigation numbers surpass the numbers of Title VII which also increased over a whopping 100 Percent in the past 15+ Years...

The DOL, well they believe that about 70 Percent of employers misclassify -

Misclassification to me is the worst.. it really Costs our economy huge.. take for example FedEx, who will be paying 1 Billion Dollars total penalty for misclassification to the IRS.. (4 years only)

that is 1 Billion dollars that the Country could really use right now.. Tax dollars to State, City and country.. so, do the math.. if 70 Percent of companies are doing this.. WOW.. that is staggering.. especially for the past 8 Years..

Hard to get my head around..

Anyways, this is my attempt to bring awareness to one of the Biggest problems in our industry, which is also devastating our country financially.. Is it any wonder that the House recently came down on the IRS and the DOL asking them to crack the whip on this..

Hopefully this information will allow an individual who has concerns to make a more informed decision when considering their next assignment

 Articles for further review on the topic

Independent Contractor (Self-Employed) or Employee? Still Confused?

Independent Contractor (Self-Employed) or Employee? Information to avoid Misclassification

You Need to Understand the Fair Labor Standards Act Part 3 - Are You a Joint Employer?

You Need to Understand the Fair Labor Standards Act Part 2 - What Is Work Under The FLSA?

You Need to Understand the Fair Labor Standards Act Part 1 - The Basics

But I Signed An Independent Contractor Agreement

Term Limits for Contingent Workers: Urban Legend or Necessary Fix?

7 Costly Legal Myths in Contractor Workforce Management

DOL cracks down! Are your classifications FLSA-compliant?

U.S. Department of Labor Emphasizes Enforcement of Fair Labor Standards Act Classifications: Are Your Employees Correctly Classified?

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ABOUT KAREN MATTONEN, CAC, CSP

Karen Mattonen started a career in Human Resources when she served as a Recruiter for Snelling Corporation. Leveraging her tenure with Snelling, Karen founded Advanced Career Solutions in 1997 focusing on the  HVAC and Mechanical Construction industry. Her reputation for excellence is echoed in the satisfaction of clients and candidates she has serviced nationwide. Furthermore, Karen is esteemed for sharing her expertise in Recruitment Education, Ethics and promoting self-regulation for the Recruiting industry.

She has a new and future-oriented vision of what recruiting can and should become: a profession we can be proud of for its ethical standing, professional conduct and ability to build great organizations. Her doing-well-by-doing-right philosophy is shaking up the status quo in an industry that needs to be shaken. She does this with conviction, leadership, and a distinctive voice that cries out for change.

Outside of the HR community, Karen Mattonen has been cited by Microsoft as a resource in how to use Microsoft Outlook as an ATS. She has also served as the Marketing and Public Relations Director for the 3^rd largest city in Utah.

Her passionate and tireless advocacy has led her to create HireCentrix - The Pulse of H.R, Regulation, Retention, Recruiting and Risk Management www.hirecentrix.com.  Hirecentrix is a company dedicated to providing training to the HR, recruiting and staffing industries, which includes a special focus on the ethical and legal dimensions through offering a full service resource for individuals to share and communicate, obtain current and accurate information, acquire and provide education and learning within the quickly expanding, diverse and rapidly changing Recruiting and Human Resource climate.

Karen has achieved accreditation as a California Accredited Consultant (CAC) through California Staffing Professionals. She has also gained her Certified Staffing Professional Certificate (CSP) through American Staffing Professionals. (www.americanstaffing.net)

Click here to reach Karen via email.

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