employer wants to illegally treat me as a contractor, rather than an employee

A reader writes:

I’ve been searching for a job for seven months and I can’t seem to get arrested, let alone hired. I’m collecting unemployment, so I have enough to pay my bills and eat, but I’m desperate to get back to work. Recently, I’ve made it through two interview rounds with one particular company. The woman who interviewed me — who is also the CEO — has told me this full-time position will be “independent contractor” status. However, I also confirmed with her that I would have to be in the office, during set hours, and on the company’s equipment. (Note from Alison: These things are part of the government’s test for whether a position qualifies as an employee or an independent contractor.) I’d also have to work “tons of overtime” that I won’t be compensated for and it sounds like she will be very hands on in how I perform my job. 

When I asked how long the position would remain as an independent contractor, she got rather defensive and said “…at least six months, because after all anyone can come off as smart and capable in an interview, but I’m not going to take that kind of chance by making a new hire an employee. You’ll have to prove yourself first.” Um, the IRS says otherwise.

My question is, if I get an offer from this company, how do I broach this subject about the illegality of calling me an independent contractor when her own descriptions of the position prove that I’m not?

Also, I really don’t feel like this will be a good fit. So my second question is, if you were in my position — meaning desperate and feeling hopeless — would you accept an offer from someone like this (and then presumably keep looking for something else) or would you decline it altogether?

Wow. Yes, hiring does indeed pose a risk — to both sides — but you’re right that the law doesn’t allow employers to shield themselves from that risk by treating you as an employee but calling you a contractor.

(A quick rundown on the law for readers who are unfamiliar with it:  Whether someone should legally be an employee or contractor isn’t just up to the employer’s preference; it’s controlled by factors laid out by the IRS here. For instance, part of their test is that if the employer controls when, where, and how you work, you’re generally an employee, not a contractor.)

However, I doubt that she is intentionally trying to skirt the law; what’s more likely is that she has no idea what the law says about this, or that it’s even addressed at all.

If you want to take the job (or frankly, even if you don’t), explain to her that what she’s proposing is illegal. You don’t need to be super confrontational about this; you can simply say something like, “I don’t think we’re actually permitted to do what you’re proposing, because the IRS has clear rules about who can and can’t be treated as a contractor.”

If you want to, you can suggest that an option would be to go the legal contractor route — a “try before you buy” option for both of you, in which you’d work on a few projects for her as an actual contractor (so you’d set your own hours and place of work and so forth). At the end of that, you can both decide if you’d like to continue it, convert you to regular employee status, or go your separate ways.

But as for whether you should be considering working with her at all since you don’t feel it’s a good fit … It really depends on your financial situation, other job prospects, and how comfortable you are turning down work.

If you had options, I’d say to run — not necessarily because of her ignorance of the law (which is actually pretty common, especially among small business owners), but because of her adversarial stance about how you could be fooling her in the interview. It’s certainly true that hiring isn’t an exact science and it’s easy to make hiring mistakes, but figuring out how to navigate that risk (and accepting that there will always be some risk to it) is part of doing business, and her stance there makes me worry about what other odd or adversarial stances she might have. And throw in your sense that it’s not a good fit anyway (which on its own is a reason to turn down a job), and you have a sea of red flags.

But people don’t always have the luxury of turning down work. So you’ve got to put together all these factors and decide what makes sense.

{ 132 comments… read them below }

  1. ITforMe

    I want to weigh in with a clarification to the “where, when, and how” stuff, because it’s not as clear-cut as saying the employer can’t dictate those things. Contractors can absolutely be required to be on-site during certain hours, and they can absolutely be subject to certain work rules and procedures. However, there should be some sort of legitimate business reason for those things, and that should come up when negotiating the contract.

    For example, if you are providing support on a new software to people who work in an office, it’s reasonable for an employer to want you in the office at the same time those people are.

    I’ve also had to use companies’ equipment, simply because they weren’t set up to connect a non-Windows box to their network. Generally, I see it as a perk, because I’d rather keep my personal equipment as such.

    Now, in this situation, the expectation of overtime and the CEO’s reactions make me think the CEO is trying to get around hiring a contractor, far more so than “having to be in the office, during set hours, and on the company’s equipment”.

    1. Cary

      Contractors provide their own equipment. In some cases you will need to use a employer’s equipment (say if your uploading software) but in the main you also use your own equipment. So if your developing presentations and doing research on the right software to buy then you would use your own equipment.

      Also there’s a difference between working set hours to do a specific task (again like uploading software) and working a set 9 to 5 in the office. Contractors are responsible for bring a project in on time but they don’t have to work on the project during hours set by the employee.

    2. Vicki

      I would also like to suggest that you ask _exactly_ what she means by “independent contractor”. Does she expect to have you bill the company directly and they will issue you a 1099 tax form? Or are they going to have you work through a form that will pay you as a W2 employee of that firm?

      A lt of so-called “contract” positions aren;t really contractor positions at all. You’re a W2 “emplyoee” (without benefits, usually) of some firm that exists for the sole purpose of ensuring that you aren’t really an independent anything.

      And if you think these companies and this system was created to get around the IRS rules… you’re correct!

      My spouse is/has been a true independent for years and the whole thing annoys him no end. It’s become very difficult for someone who truly is an IC to get paid that way anymore.

      1. Ask a Manager Post author

        On the flip side, companies sometimes make you jump through way too many hoops to prove you’re really an independent contractor. I have a client who annually asks me to provide tax forms and copies of invoices to other clients, so that they can have paperwork on file proving I’m really an IC. I black out all the info on the tax forms because that’s no one’s business but mine, so I don’t know what they really prove. I think it’s just covering their asses.

        1. ITforMe

          Are you not incorporated? I am incorporated as “ITforMe, inc.” and invoice my clients as such. They don’t even give me 1099’s.

      2. Cynthia

        Absolutely Vicki…I actually filed a complaint against a company who insisted on me lugging their material and equipment around and set my hours and provided “supervision” and made their employees sign a contract that took out “fees.” ALL ILLEGAL. When I didn’t receive my pay that was due me, I filed a legal complaint. They settled and paid my salary…but why do we as self-employed people have to go through all this?? People are under the impression that self employed people do not have rights. The fact is that THEY DO. It’s all listed in the Department of Labor websites for every state.

        1. Cynthia

          Correction: I wrote “employees.” That was wrong…I meant “workers” because of course they are not considered employees.

  2. Nodumbunny

    Boy, if I were you and I had options, I’d run. In addition to the confrontational stance on keeping you a contractor, she’s basically telling you up front that she’s going to work you like a dog with “tons of overtime” and she’s going to micromanage you (hands on). Usually they try to sugar coat it before hiring and then surprise you with the overwork and micro-management – she’s telling you up front!

    1. Long Time Admin

      Oh, yeah. Run like crazy.

      If she’s like this during an interview, I can guarantee you that she’ll be 10 times worse after you accept the job. (I speak from experience.)

      I like Alison’s suggestion of being a LEGAL contractor for a stated period of time to see how it works out.

      Good luck. It’s tough when your only choices are being unemployed or employed by a crazy person.

  3. Ryan

    Her adversarial stance and general philosophy about “trying” employees as contractors before “buying” makes it sound like this CEO may not be doing the best job possible in ensuring a good fit from her end of things. Sure, there’s no way to predict the future with 100% accuracy, but there are things that can be done to ensure a good fit besides just slapping all new hires with the “independent contractor” label, just in case they don’t work out. That would make me more than a bit leery of working with this outfit, as the likely constant employee turnover would make for a less-than-desireable working environment.

  4. Jamie

    It’s too bad the employer doesn’t realize she can have her trial period legally. It would cost a little more money, but many temp agencies work out deals with companies to run new employees through them for a period of time (weeks or months) during a probation period. The fees are less when the company is the one finding the employees – the temp agency just has them on their books for payroll for the determined period of time.

    In addition to it being at a lower mark-up than if it were labor found by the agency, the hire fees are waived because of the arrangement.

    1. Sabrina

      This is what my company did with me and does with other new hires. Unfortunately it generally takes a lot longer than the temp agency leads people to believe.

      I was going to ask what the difference is between an independent contractor and a temp though.

      1. Ask a Manager Post author

        Independent contractors are self-employed (1099s). Temps are usually employees of a third party, like a temp agency (and are usually W2s).

      2. Jamie

        Yes, a lot of temp to perm assignments can take longer than originally stated – but in my experience that’s a temp to perm assignment via the agency.

        What I’m talking about is when the company wants a perm employee from the start and is using the agency for the probationary period. As long as this is honestly the plan, it’s in the employers best interest to bring them on when the period is over since it then saves the mark-up.

        A temp employee is different than a contractor. When I temped (both as a real temp and for a probationary period) you are an employee but of the temp agency and not of the place you’re actually working. There are no rules for autonomy of work or location, scheduling, etc. And the same OT rules apply for non-exempt temps as they do for direct employees.

        I.e. if I am your contractor I can set a fee per project and however long it takes me is my problem. If I’m your temp you need to pay me for hours worked, according to labor laws.

        You can also choose to pay a contractor hourly, but there isn’t the same discretion with temps.

    2. Anonymous

      This is exactly what I would do. Any staffing company would jump at the chance to make easy money just to run you through their books. When the staffing company actually advertises the position, interviews candidates and sends someone in contract-to-hire, they often charge astronomical fees on top of your salary. At one position, I was making $70K and the staffing company was charging $130K (assuming 40-hour work weeks). But if a company walked in off the street and said we’ll give your staffing company $85K to hire this person at $70K, they would still have done it because it’s guaranteed income for almost no risk or effort.

  5. A Bug!

    That’s a pretty weird way to test out an employee. Is it not permitted to have a probationary period there? All of the jobs I’ve ever held have had a probationary period written into the contract. A couple jobs even started me at a lower wage because I was an untested quantity, and then they reassessed at the end of three months.

    This CEO seems like a dangerous combination of ignorant, entitled, and aggressive, what with the “lots and lots of overtime” bit and the bristling at the questions. I’d probably only take the job if I had to in order to make ends meet, but I wouldn’t stop my job search for a second.

  6. Ryan

    I’d also add the consideration that if all this “tons of overtime” isn’t paid, that can significantly decrease the actual hourly rate (or figurative rate if you’re salaried), making things even less attractive. And that, of course, isn’t even taking into account any legal ramifications of unpaid overtime.

    Might be better off working less hours at several part-time gigs and making the same amount while still having time to keep looking for a job you’re really passionate about.

  7. M

    I’d take it, knowing it would probably be awful. Wouldn’t it be better from a future job-hunting POV to end that 7 month unemployment gap as soon as possible? If you leave soon, you’ll be able to say it was a short-term contract job rather than looking like you jumped ship for something better.

    1. Anonymous

      But on the other hand, concerning this CEO and her oddities, she may not give the candidate a positive reference. If it was truly bad, it may even be wiser to keep it off her resume entirely.

      I’m in the same boat as the OP, but when there’s huge red flags before even taking a job, you have to weigh your options really, really carefully. Taking a job and leaving it shortly after can really screw with unemployment, if another job wasn’t lined up first.

    2. Anonymous

      It’s also really hard to dedicate yourself to a job search when you are working tons of overtime.

      1. Dan

        Yeah, this is what I was thinking. If you take it, you take it, you run the risk of getting stuck there because you cannot dedicate adequate timed to your job search.

    3. OP

      Hi M..,

      I see what you’re saying. In an effort to make up that blank space on my resume, I added my related temporary work that’s been filling my time, as well as related volunteer work. Also, I do have the luxury in my profession of people frequently going from full-time in-house positions to long stretches of freelancing, so seeing a resume with both types of work doesn’t necessarily send up a red flag to prospective employers.

  8. The IT Manager

    I am not in your position so its difficult to place weight on your feelings of desperation and hopelessness, but if you take this job with “tons of overtime” when you you have time to keep looking for something better? To be honest, it doesn’t sound like working there would not end your feelings of desparation and hopelessness because it sound like you’d be desperate to get away from day 1, but you’ll be overworked and have no time to look or interview. And it sounds like you might be fired after 6 months or so and left trying to emplain why you have such a short term job on your resume.

    The red flags are very much there; you have to weigh it against the current situation. In your shoes, I think I’d run.

  9. Lee

    Think about it this way – she has already indicated there would be a lot of overtime. This will not leave you much time to find or interview for other opportunities. It would be better for you to find something less stressful with set hours to get the money coming in than take a position like this. It would be more relaxing to take a temporary position as a cashier at a big box store which I have done before to pay my way through school.

  10. Anonymous

    What about the job itself? Are there any learning opportunities there?How about suggesting a 3 month contract (or 4, 5, or 6) so you have a chance to get back into work, and then you can continue to look for jobs in the meantime.

    I know what it’s like to be desperate for work and not find anything. I accepted a 6 month contract last year with a very low salary at a place I wasn’t crazy about. Even though I absolutely hated it from week 1, I kept a good attitude at the office, got along with everyone, did a VERY good job, and 4 months through the contract found something much, much better. I also managed to find a good reason/excuse for quitting, so I left on good terms.

    Sometimes it helps just to get out of the unemployment rut.

  11. Andie

    Listen to your intuition. When someone shows you who they are believe them! If you have a bad feeling about a job you should listen to yourself. You are the only one who knows what you can handle.

    1. K.

      “The first time someone shows you who they are, believe them” is a lesson it took me years to learn, but once I did, life got so much easier. I live by this creed now. Maya Angelou, the voice behind that quote, is very wise.

      In this case the employer is blatantly showing her hand and telling you straight out of the gate that it’s going to suck – and HOW it’s going to suck. I know exactly how you feel, but if you can keep your bills paid and your stomach full, I’d let this go.

  12. Bridgette

    AAM – how does this work for a probationary period that is treated as “contractor”? I ask because it sounds oddly similar to a situation my husband experienced when he got his current job (been there for 5 years now). When he first started, he was informed that he was on a 3 month probationary period. Okay, no problem, lots of jobs do that. However no taxes were taken out and he was listed as a contractor. We didn’t know about this until about a year later when we got a bill from the IRS saying we owed back taxes. The situation has all been cleared up now, but is what happened kosher? I know you can’t really speak officially on legal matters, but I’m just curious about what is common. The company uses a third-party HR company instead of in-house. Of course I wasn’t present when my husband did his day one paperwork so I don’t know all the details. When we first found out what was going on, we were like, well that sucks, stupid HR company, better suck it up and pay our taxes. But now it sounds like we should have taken other action. Thanks!

    1. Bridgette

      I must add that my husband was scheduled for regular 8 hour shifts where he had to be present during set hours and use company equipment.

    2. Ask a Manager Post author

      It sounds like it wasn’t legal — although there could be details to the situation that I don’t know about that could make it legal!

    3. Jamie

      “We didn’t know about this until about a year later when we got a bill from the IRS saying we owed back taxes. The situation has all been cleared up now, but is what happened kosher?”

      Did he fill out a 1099? Also, I would think he’d have noticed on his first check that no taxes were being taken out so I can’t imagine why this would be a surprise a year later.

      If he filled out a 1099 instead of a W-2 then your husband should have known he was responsible for those taxes.

      1. Bridgette

        I don’t know if he did or not. Since it’s been a while I can’t remember which he filled out, but I will keep that in mind for any future jobs we have. I didn’t realize there were two different forms for this (which is probably why we were surprised about it). Thanks!

      2. Anonymous

        Ugh. This same thing happened to me when I was 20. I was working as a receptionist (in their office, on their equipement, during their set hours), and since it was just for the summer, they said “we’ll pay all the taxes at the end.” Then they reported me as a 1099, didn’t tell me, and I ended up owing tons in taxes. And fees because the taxes were late. It was a nightmare.

        1. Emily

          It happened to me when I got a summer job as a receptionist in college. It was the very picture of a temporary position. Not knowing better, I accepted the explanation—something about it being more efficient to pay taxes once than to have them spread over two different quarters? I still don’t know if it was a deliberate move or a careless mistake. Luckily, I made so little that the late fee was waived.

      3. Sue

        One doesn’t “fill out a 1099” – they fill out a W-9 and they receive a 1099 at the end of the year

  13. Jamie

    What struck me about this is that the employer admitted there would be “tons of overtime” for which you won’t be compensated. This, coupled with the OTT cynicism of candidates becoming good employees clearly illustrates that this won’t be the most cooperative of work environments.

    It’s rare that an interviewer shows their hand in such an unvarnished way right off the bat. At least it’s better than trying to lure you in with false promises.

  14. J.B.

    If you turn down work, what does that do for your eligibility for unemployment? (Don’t know what other states are like.) And if you take a job as an independent contractor and then leave, are you eligible for unemployment anymore? Do you have anything in writing about the setup (independent contractor + description of expected hours)? I mean, if you could present evidence of a proposed illegal arrangement then you might be able to keep drawing unemployment.

    1. Stephanie

      Varies state to state, but some states will deny benefits if it’s found you received an offer for work and turned it down. There might be an appeals process, but I’d imagine there’d be a heavy burden of proof to show that you had good reason to turn down an offer.

      1. Natalie

        Hopefully “prospective employer proposed tax fraud” is a good enough reason to turn down the offer!

  15. Mike C.

    You know what, I don’t care if this is a “small business owner”. They have a responsibility for knowing and following the law, especially basic labor laws like this. I can’t wiggle out of a speeding ticket because “I didn’t know what the speed limit was”, and they shouldn’t be able to take advantage of the tax benefits for improperly classifying employees.

    They might as well be stealing from everyone. Report them to your state labor board regardless of whether or not you take the job.

    1. Ask a Manager Post author

      I’m not suggesting that they be exempt from the law because they don’t know what it is (like your speeding ticket example). Rather, I’m suggesting not writing off an employer for that reason (but you should, of course, correct them).

      1. Mike C.

        That’s fine, I’m not taking issue with your advice, I’m taking issue with the business in question.

    2. Rana

      Agreed. As a freelancer, one of my biggest concerns is not properly following the law out of ignorance, so I’ve made a point of learning about which laws do and don’t apply to my situation. The IRS has a *ton* of educational resources for small businesses, as does the public library, so there’s really no excuse for not knowing the basics.

  16. Anonymous

    I don’t really understand why the employer feels treating everyone as an independent contractor makes it so much easier to “try before you buy.” Isn’t there only one state that doesn’t have at-will employment? All she has to do is fire him if it doesn’t work out. If she’s worried about, idk, discrimination claims or something, those can come out of nowhere regardless.

    Is it because IC’s don’t get unemployment when they’re fired?

    1. Anonymous

      That, and the fact that ICs have to pay their own taxes (including Social Security, Medicare, etc.). Employees have their portion of those taxes taken out of their checks–I think half?–and the employer pays the other half. ICs have to pay the full amount themselves.

      1. Tax Nerd

        Anonymous has it. The company saves on their share of Social Security and Medicare by dumping the cost on the employee, err, Independent Contractor. They also save on federal and state unemployment insurance by not paying any for that worker, who in turn isn’t eligible to collect any.

        I’m one of the cynical ones, but I think most companies know this isn’t quite legal OR think that getting the worker to agree to it somehow makes it ok. (Because a contract between A & B trumps whatever silly rules the IRS makes up, or something.)

        This has been a hobby horse of the IRS’s lately, since there’s a lot of abuse and/or ignorance. Workers that mind picking up the company’s share of Social Security and Medicare and/or not being able to get unemployment can file an SS-8 with the IRS, which may kickstart an investigation. Turning an employer into the IRS is sure to not only burn a bridge, but nuke it, so I don’t suggest it to anyone that hasn’t moved on already. (At that point, things are usually so contentious a reference is out of the question.)

    2. Max

      “Try before you buy” is just an excuse to convince workers to start off for less than the industry-standard wage in exchange for a promise of improved conditions after a few months. However, it’s rare that these agreements are put on paper, so the employer can just refuse to give a raise at the end of the “probationary” period, but graciously allow the employee to keep their job at the substandard wage they were hired at – sometimes with another false promise of later raises. That exact thing has happened to me.

  17. Kaz

    To me it sounds like she probably runs through a lot of people – she figures that she’s getting ahead of the game by getting a ton of unpaid labor out of each of these people, until they quit or start making noises about ending their “probationary” period. I would not be surprised if, on the off chance she actually keeps you, you continue to have problems getting paid for the hours you work. Some people do not understand that paying a fair wage to people who produce good work is a lot more efficient than paying not very much to people who don’t produce anything at all.

  18. Anonymous

    I’ve come to realize that most of the time when people are pulling this crap they do know it isn’t 100% legal. All they care about is their bottom line— so you can work for them for 6 months without any benefits because you aren’t an “employee” and then at the end of the contract they can let you go, fight your unemployment claim (that they don’t always win— but they think they will), and then do it all over again to another unassuming victim…. all to avoid 1)providing employee benefits 2)salary bumps 3)taxes/unemployment obligations

    If they are telling you when to work, where to work, and what to work on, you’re an employee. Don’t let them cheat you.

    1. Ask a Manager Post author

      I don’t disagree with this advice, but I disagree that most employers pulling this are aware it’s illegal. In my experience, most genuinely don’t know.

      1. Jamie

        I agree 100%. The gap between what people and businesses should know and do know is bigger than most people think.

        There is an old saying about not attributing to malice that which can be explained by ignorance and in my experience that’s typically true.

        1. Ask a Manager Post author

          It’s also true that there are so many complicated and varied laws about employment that it’s basically impossible for a small employer to keep track. You need to have someone almost dedicated entirely to doing that, and that’s not feasible for most small businesses. There’s not just one book you can buy that will cover everything you need to know — there are a ton of rules and regulations, some of them obscure and arcane, and a lot of them you wouldn’t even think to look up because it wouldn’t occur to you that it would be subject to a law. So you can basically assume that every small business is violating employment law in one way or another; there’s no practical way not to.

          1. Jamie

            This is a really good point.

            This is why it’s so important for people to self-advocate if something doesn’t seem right and bring it to the attention of the powers that be. A company with good intentions will want to know if there is something askew and will look into the matter.

            So if people are unclear about something it’s important to ask with a neutral tone of wanting clarification and not come off as accusatory. There is no point in putting people on the defensive for what is, in most cases, just honest mistakes.

            1. Tamara

              This is so true. When I started my current job, there were only a handful of employees and no HR. A number of our current policies & procedures came about by employees asking questions.

          2. Charles

            Normally, I would agree there are too many laws for a business owner to keep track of . . . However, in this case whether someone should be paid overtime or not seems so basic to me that I’m having a hard time giving this CEO the benefit of the doubt. (Perhaps, I am too much of a cynic?)

            1. fposte

              But it’s not basic–if the position legally is an IC position, you don’t have to pay overtime.

              1. Anonymous

                the thing that confused me in the firstplace was how can they be a contractor if they are working tons of overtime. Either they should be getting paid a fixed amount to do a specific job or they should be paid hourly. At least that is how I understood contracting to work.,

          3. Grace

            Actually there is one very practical way for small businesses to get educated on employment law: join your state’s Chamber of Commerce. Mine (California) has: an online store with the legally required posters and pamphlets; online training (sexual harassment, discrimination, workplace violence, etc); an employee manual that you can tailor to your company (insert logos, etc, delete inapplicable sections); legal updates, and
            access to the Chamber’s employment legal counsel hotline
            for being a member (about $600 a year).

      2. Max

        This is definitely true. Based on how badly some companies violate employment law out of sheer ignorance, I wonder if lot of employers don’t even realize that employment is regulated at all, and therefore don’t even try to research employment law because they think they can just do whatever they feel like. For example, the lighting firm that only hired born-again Christians.

        Unfortunately, though, just telling her it’s illegal may not help. A lot of people get indignant when told that something they’re doing is illegal, and a lot of people will simply ignore any legal advice that doesn’t come from a lawyer. You can try negotiating, it won’t hurt, but you may not get anywhere without a letter from your legal counsel backing up your words. And, of course, bringing lawyers into it won’t always endear a prospective employer to you.

      3. LL

        What about when the small business owners are attorneys? I interviewed at a small firm for a paralegal position and they told me it was salaried/no overtime. I’m pretty sure paralegals are not exempt since it was not a supervisory role. They also said there would be lots of overtime so it seems to me they just wanted to avoid paying overtime so they classified it as exempt/salaried.

        1. Grace

          Go to work for attorneys who obey the law. (I work in law.) Report the attorneys who are in violation of the Labor Code and taxes to the IRS (Whisteblower Unit which you can find at their website and they will email you the award forms and you get a cut of backtaxes the government finds its owed), your state taxing agency (they want their revenue), your state unemployment office (they want their revenue), and
          your state Labor Commissioner. Take care!

    2. Student

      Maybe it’s just because I grew up on the “wrong side of the tracks,” but I think Alison’s correct – these companies probably just don’t know what is and isn’t legal. Companies that do know what is and isn’t illegal will do far worse than this when they decide to ignore the law.

      Why pull this contractor vs. employee thing to skirt taxes unless you really believe it is legal? If you just don’t want to pay taxes and don’t want to follow the law, then you convince the desperate employee to be paid under the table. Alternatively, you hire illegal immigrant labor and pay them less than minimum wage. In both cases, the employee is partly complicit in the crime (according to existing law, not common sense) so he can’t easily report you to the tax man. If you’re going to knowingly commit the tax crime, it makes a lot more financial sense to go whole hog and also protect yourself with easy victims that can’t complain. If you think (albeit wrongly) that you’ve found a legitimate tax loophole, it makes sense to diddle with this contractor vs. employee status garbage and create the paperwork trail that can be used against you later.

  19. Charles

    Sorry to say; but this situation has become very common in this economy.

    And it isn’t just small business owners that are doing this – large corporations and non-profits are doing the same. Why? Because they can; If the OP turns them down there are several other unemployed folks waiting for the job. (even a bad job is often better than no job)

    I just finished up a short assignment that was suppose to last several months which instead lasted just a few weeks because, among other nonsense, I would not do the overtime they requested without pay and I refused to “falsify” my timesheet. “Sorry, But, I cannot honestly put down only 8 hours when I, in fact, worked 10 hours that day. The contract that I and you signed states that I am to be paid hourly.” (Can you hear me now?)

    OP, I would do as AAM suggests – counter with you own proposal and she what she says. And then, even if you do accept something I would continue to look elsewhere such an “adversarial” employer will not be easy to work with. If does sound like she wants something for nothing.

    P.S. “adversarial” – hehe, such a nice way to call this employer an “ass.”

    1. Cindy

      In San Francisco this situation is incredibly common–I know because I was a fake “independent contractor” at a job for two years, and my tax guy said he saw it all the time.
      I stuck it out for so long because I enjoyed the job and it was great for my resume, but it was also sometimes confusing and upsetting to be in the position of having to act like a salaried worker without getting any benefits or job security.
      If you do take it, make sure you’re using the ruse to your own benefit when possible–tell her you can’t do overtime because of work for your “other clients,” schedule vacations, and just generally act like someone who’s a busy, in-demand pro at consulting.

  20. fposte

    Setting aside the (rather humongous) legality issue, I wish employers like this would ask themselves “What kind of employees will I get with this, and are they the same as the employees that I want?”

  21. KayDay

    This sounds really shady to me. Is there an end to this contract? If not, will you get paid if you bail out before your “project” is deemed “completed”? In my experience, if someone is hired (legally) as an independent contractor as a trail before being hired as a permanent employee, they are still given set dates for the contract, and once the contract is concluded the employer can decide to hire the person as an employee, renew the contractor for another project, or never speak to them again. But the contractor is usually given a time frame for this decision.

    Obviously it’s illegal, but as a few commenters have mentioned, that may (or may not) be due to simple ignorance. However, usually when people get genuinely confused about independent contractors, they think it is the temporary status that makes them 1099s (and don’t know about the location, time, and employer direction aspects). I’ve never met anyone who thought that a permanent employee was a 1099 contractor.

    1. OP

      Really good points, KayDay. And no, this “contract” was to be “open-ended for now,” but in six months, she would consider making me an employee- “consider” being the operative word.

  22. Ellen M.

    ITA with Alison, lots of red flags here, but it is a very tough call when you really need a job.

    This caught my eye (sorry, it’s a bit off topic): “I’m collecting unemployment, so I have enough to pay my bills and eat…” Wow! In NY (City), unemployment (set by the state) is NOWHERE NEAR enough to live on ($405/week maximum), and what they make you go through to get it! And I am not talking about an extravagant lifestyle by any means. It is a shock to me to realize that there are some places where the amount you get from unemployment and the cost of living match up.

    That’s something that doesn’t get talked about too often, that in some parts of the country you can get by on unemployment, for a while anyway, and in others you absolutely can’t. Not even for one month. No amount of creative budgeting or belt-tightening can stretch unemployment $$ if the amount doesn’t even cover rent, let alone anything else. (Yes, NYC is very expensive but if you live there and work there and get laid off there… what can you do? Go back in time, move somewhere that has higher unemployment benefits, work there for years and then get laid off from there?)

    Sorry for the detour!

    1. Jamie

      I think it depends on how much you make and yes, where you live.

      There is a cap, at least in my state, and so the more you make over that the harder it will be to dial it back. If you are making less it may be easier to stay afloat as you will make less, but also not have the expenses of a job.

      It’s also easier if UI isn’t replacing a sole earner. If you have two earners in the home maybe you can get by with belt tightening, especially if it’s the spouse with the lower income on UI.

    2. OP

      Ellen M., I so feel for you. I used to live in NYC and there is no way the unemployment benefits I receive in my new home state would even cover my previous rent in NYC- let alone food or electricity. I do have to live very, very frugally, but I can hack it. Also, I’m single and childless so I’m not supporting anyone else and my only debt is federally funded student loans- so once you lose your job, the government suspends your payments until you’re employed again. If my circumstances were any different, I’d be a goner.

      1. Ellen M.

        Yes NY State is bad – it is among the lowest unemployment benefit amounts and the amount has not been increased in over a decade. For the record I am employed and have been for some time but I am aware of the NY State unemployment benefit maximum from the past and because I counsel and advise those who are unemployed, in NYC and the surrounding area.

        It is a much worse thing to get laid off in some parts of the country than others. Most people have no idea of this unless they live in one of the low-benefit states and until they get laid off.

      2. Elizabeth West

        Me too. I’m only getting slightly over half what I was making on unemployment, and it’s lucky it’s only me and the kitty. Although, it’s only me and the kitty. She won’t get a job, the lazy bum.

        If I had another income in this household, I wouldn’t worry so much about taking a survival job, but I’m deathly afraid I’ll get stuck and won’t have time to look for something better. Also, if they found out I was still looking, I could get fired. Then I won’t get back on unemployment. I’m on the extension now. :P (I’m in Missouri, btw.)

  23. Anonymous

    RUN. If you take the job as an independent contractor, you CANNOT go back on unemployment. If they hire you as a temp W-2, you can go back on unemployment – and it will probably extend your unemployment by a few months as well. Atleast in Massachusetts, that’s the way it works.

    1. Ellen M.

      ^This is a good point – find out how accepting this job will affect your eligibility for unemployment.

    2. OP

      Thank you Anonymous! I did check and in my state, you’re right! If I take an IC job, I lose my unemployment benefits for good. Thank you for mentioning this!

  24. Natalie

    Aside from all of the other flags, do you have any experience as a contract employee OP? Have you ever had to write or negotiate a contract and hold a company to it?

    Given this person’s general attitude, even if you do propose a true, legal, 1099 contract arrangement I would not be the least bit surprised to hear the employer refusing to pay down the line or otherwise jerking you around.

    1. OP

      Hi Natalie, no I have no experience working as an IC, let alone drawing up or negotiating a contract relating to it. Also, I’m inclined to agree with your assessment about my future with this woman given her general attitude.

  25. Alisha

    I worked on a 1099 while being treated as an employee (i.e. given a set schedule, told how to do my work, made to use company computer and software to perform tasks) when I was younger. It was a HUGE mistake, and one that took me several years to recover from, confidence-wise. If a job opportunity doesn’t pass the smell test, there’s usually a reason – and I’ll bet you anything that, as with my 1099 job, this company is chock full o’ problems that will transform working there into your worst nightmare. And you also say you don’t feel like a good fit for this position? RUN.

    Better to pick up some freelance work, volunteer a bit, get active in a professional organization, even sign up for a class or two, and hold tight a little longer than get suckered into this non-“deal” (well, for everyone but the CEO, that is).

    1. Alisha

      When I asked how long the position would remain as an independent contractor, she got rather defensive and said “…at least six months, because after all anyone can come off as smart and capable in an interview, but I’m not going to take that kind of chance by making a new hire an employee. You’ll have to prove yourself first.” Um, the IRS says otherwise.

      Oh.my.god RUN! When a boss says this, it really means “I like to get employees on the cheap, and kick them out before I have to cough up the money for their payroll taxes, benefits, and the other costs of running a business.”

      Have you checked out staffing agencies in your area that specialize specifically in your field? The jobs they place for are not always ideal, but I’ve yet to hear of a staffing agency – even in my small city, where many companies are rife with nepotism and practices that flout the law because we ain’t got many choices – that places its clients in blatantly illegal situations. Most staffing agencies even have healthcare and 401Ks nowadays, and since you’d be on a W-2, if the job ends after a finite period, you can go back on UI, since you paid into it.

      1. OP

        Hi Alisha-

        Thank you and yes, I have signed up with several agencies which deal specifically with my field of expertise. So far, they’re all very optimistic about my level of experience/education/references, but none have panned out into actual employment yet. (I’ve not given up on them though- I like having others in my corner who are motivated to help me find employment.)

    2. OP

      Thanks so much, Alisha! I feel so much better in my choices getting some affirmation for that sinking feeling in my gut. I agree that this is essentially a “non-deal” which, if I were to take it, would put me in a worse position than the one I’m in now. In the meantime, yes, I’m actively networking through professional organizations, volunteering, and picking up temporary work wherever I can.

    3. Alisha

      Hi, OP! I’m glad to hear that you’ve worked through this and are feeling satisfied with your decision. From everything else you’ve told me about your situation – keeping active w/ freelance and volunteer work, contacting staffing agencies, and keeping your hopes up – it also seems like you’re in the most ideal position possible.

      I know how frustrating it feels when recruiters and headhunters don’t seem to have openings that are quite right, but as a colleague whose opinion I really value told me back in May, “It just takes one phone call for the right opportunity to make a difference – so for all we know, you could be headed back to work by this time next week.” I think of his advice often when I’m feeling low about my own job search, and it really helps, particularly once I passed the six-month mark of being unemployed (and the one-year anniversary of my hard-core job search, since I’d launched it while still employed) earlier this summer.

  26. OP

    Wow, thank you Alison for your astute advice, and to all the commenters here who took the time to respond. When you’re unemployed, it can feel really isolating, and reading all these responses, I feel supported for the first time in a long time.

    Alison, what you said here, really hit home:
    “If you had options, I’d say to run — not necessarily because of her ignorance of the law (which is actually pretty common, especially among small business owners), but because of her adversarial stance about how you could be fooling her in the interview. ” Given that I spent a total a two hours with this woman, researched and pitched ideas to her on how I’d make her business more efficient, not to mention the hour each way I traveled to and from her office- on two separate occasions- it was discouraging and frankly weird that she insinuated I could be purposefully deceiving her. That was one of a number of oddities I experienced from her during the process- which included as other commenters touched upon, a prevailing adversarial and entitled attitude on her part.

    As for the legality issue- your advice was spot on. The only reason I can’t exactly follow it exactly is because after reading the comments and checking with my unemployment office, it turns out that if I do accept IC work, I automatically lose my unemployment benefits for good. So even if we could work out that issue, if she were to lay me off, I’d be without any income or recourse. For an established company, I might take that chance, but this company is a small startup, which has only been up and running for a few months, and it’s the first time this woman has run her own business. She and her company both strike me as entirely too unstable to take that chance.

    After reading your response and the responses of everyone else, I’ve realized the truth of the matter is I’m not at the end of the line with my benefits, so I’d rather have the time and peace of mind to keep looking for legitimate work. I really wanted this to be “it” but as you mentioned, the red flags are plenty and my gut is telling me to run for it.

    Finally, as for one of the commenters who suggested I could get in trouble for turning down work, I checked with my state’s unemployment office and I’m not obligated to accept work under circumstances I know to be lawfully fraudulent. The search continues…and thank you again, everyone!

    1. Mike C.

      OP, thanks for the update. We all wish you the best of luck in your search!

      Please find a time to take a break and notify your state labor board about the offer you were given. You were most likely not the first person to be given this and it’s not fair to you or other business owners who are playing by the rules.

      1. Stephanie

        OP, good to hear you can turn this down without consequence to your UI. Just to be on the safe side, I’d make sure to document all this (i.e., the illegal working conditions) in case there’s any dispute with the UI Office. Speaking from experience, resolving any issues re: your UI is A LOT easier if you can back it up with documentation.

        In the meantime, I’d make sure you’re doing relevant volunteer work to keep yourself current (or temp work if you can find it). My background’s in engineering–while I was out of work I volunteered with a HS robotics team to show I was keeping technical skills current.

        1. Anonymous

          I wouldn’t even report it to your UI office because of the potential hassle. Save the documentation in case it comes up for any reason but there’s no reason to proactively disclose it.

          1. OP

            Just to clarify, I haven’t been extended an offer yet- I’ve made it past two rounds and was told that it was down to myself and one other person.

            1. OP

              Also, if she insists that this is an IC role, and I turn it down, I’m not “turning down work,” according to the law, but instead I’m “refusing to go into business for myself” which is how the UI department views Independent Contractor work. Refusing to start your own business is a totally legitimate route to take under the rules governing my unemployment benefits and has no bearing on my eligibility to keep receiving them.

              1. NicoleW

                I just have to say, OP, that I am impressed with your detailed research on figuring out the UI laws in your state. All really great information that obviously helped you make the best decision for yourself. So kudos and good luck in your search!

          2. Elizabeth West

            Might be a good idea. They will NOT call you; they will snail mail you and then you have to wait for them to call. Could be up to a week, and they may suspend your benefits until it is cleared up.

        2. OP

          That’s a great suggestion, Stephanie. I never realized there was an opportunity to use my particular set of skills for volunteer work, but I just recently found a company that matches people in my profession with pro-bono opportunities working with non-profits. I have an interview with them this week.

          1. Stephanie

            This could have been because I was in a state with high unemployment and a large seasonal retiree population (Arizona), but I always found places like the Red Cross or the local food bank had a surplus of volunteers.

            I would just caution that you the keep the upper hand while you do it after a while, it can be hard to not feel bitter that you’re volunteering work you used to get paid to do. As soon as it starts feeling exploitative or even just unenjoyable, stop.

            1. Ask a Manager Post author

              It’s often a good idea to look at volunteering for smaller places that don’t get the same amount of attention as, say, the Red Cross, etc. They’re often much more in need of help.

              You’ve also got to keep in mind the whole purpose of volunteering (it’s charity work) so that you don’t start feeling taken advantage of.

    2. Natalie

      If you feel comfortable with it, I agree with Mike C that you should drop an anonymous note to your state’s labor board.

      Good for you for trusting your instincts. I imagine it’s very hard to turn down paid work when you’re unemployed. Our society often seems to think that literally any job is better than no job, and it’s very easy to internalize that thinking and feel guilty for not taking the first thing that comes along. Really, you have to think more like a business and do some cost-benefit analysis.

  27. Nichole

    The OP mentions being on unemployment, so remember that turning down a job is a major no no in most states. I’m not by ANY means saying to take this illegal job just to keep your unemployment, I’m just saying get ready. In my state, and I’m sure most others, turning down a job offer that requires breaking the law, even from a legitimate company, is an exception to the rule (ie “unsuitable employment”), but unless you’re dishonest on your voucher -not smart, you *will* get caught- it could place a hold on your payments. Depending on how efficient your state is in this respect, it could mess your world up for weeks while it gets straightened out. Still run away as fast as you can from this, but you probably want to talk to someone at your local UI office before this goes down to manage the fallout. (I’m mostly skimming today, but I figured this was important enough to mention, so I apologize if it’s already been said. )

    1. Alisha

      How does that work in your state, Nichole? In mine, which just re-vamped their job-search “recording” process, they only “audit” people who the state deems “high risk” for being 99-weekers. And even then, you only need to bring your most recent two weeks of job searching materials to the office. You only need to look for 3 jobs + complete one other job-search activity, or look for 4 jobs if you don’t want to do the activity, each week. The rules are that you need to take any “suitable” work within 45 minutes of your house, but you may also turn a job down if the pay is drastically different or it’s in an unrelated field.

      My state’s system isn’t perfect, but I feel it’s a lot better than forcing people into positions where they’ll be miserable, back on the job market within weeks, or treading water while their valuable skills go to waste and become outdated. (Of course, I realize sometimes, you just need to take a job to pay the bills – and in the past, I’ve been in that situation.) I’ve observed that many Americans share a strict Protestant work ethic, and seem to view miserable/low-wage/soul-destroying, and depending on the person, illegal, work as ‘character building.’ As someone who has specific medical limitations and literally cannot do certain types of jobs, I’ve yet to find my character improved by working in wet pants because I wasn’t able to “hold it” until my next strictly timed break, or getting screamed at for messing up the data mining of spreadsheets with thousands of cells, but I couldn’t make that call for others of course.

  28. Anon

    Alicia my state seems to be similar to yours. In fact, I recently had to go in for an interview with them at the six month mark to prove I had been looking for work. I took with me a stack of printed out screenshots of every want ad I had answered and another stack of printed screenshots of every email application I had sent out in response to those want ads. They actually laughed. Instead, they had me instead to fill out a form that required only the vaguest of information on the companies I chose to apply to- I didn’t even have to supply contact information on any of them. The basic rules are also the same- I don’t have to take anything out of my field, way under my pay scale (meaning I don’t have to take anything that won’t cover my basic expenses), or too far from my home. I still keep detailed records just to cover myself in case, but all in all, my state’s system doesn’t seem to do any hardcore checking and they actually found it funny I assumed otherwise. I’m curious- Nicole, do you live in a state where they call prospective employers about the candidate who applied? I’ve always wondered how, if you chose to turn down work, the UI office would know when in my state, they can’t be bothered to even collect contact info.

    1. Alisha

      OMG, my husband had that EXACT experience going to the UI office. (He’s an ex-tradesman, so he said he figures they consider him “high risk.”) He was sweating bullets the night before, thinking he was being asked in because his UI would be cut off, but they just laughed at his job-search records and made him watch an hour-long PPT presentation about the importance of filling out your profile on the state job-search website.

      I was scared when I got my papers in the mail because I’d read an article in the (I think?) Seattle Times about how, in the height of the recession, people were struggling to even find 3-4 jobs a week to apply to. One guy in the trades said he was applying to fishery and oil rig jobs in Alaska and “praying he didn’t get them” because he couldn’t be away from his young kids. I was employed during the worst of the recession, and that really opened my eyes to how bad it was, and how I should stop complaining so much about my situation. I’m not religious, but I actually find myself pretty much praying for our country…or whatever the agnostic’s equivalent is. : (

  29. Employment lawyer

    Just to clarify (this is an important point):

    The IRS defines an independent contractor for the purposes of federal wage and tax laws. However, many states have a MORE restrictive definition of “independent contractor” than does the IRS. In Massachusetts for example, the vast majority of people who meet the IRS test are nonetheless “employees” under state law, thus exposing many employers to triple damages for wage violations.

  30. Kat M

    This sort of behavior is rife in my field.

    I have a collection of illegal contracts that I’ve refused to sign. They’re pretty hilarious … in retrospect.

    No, “I don’t feel like paying taxes on you” is not enough to make your employee an IC. :P

  31. Mike

    This was a very interesting thread to read as I was a contractor/employee/who knows what for about 5 years teaching theatre programs to youth. One company called me an independant contractor, but hired me on employee agreements and taxed my wages. They never made it clear why they insisted on using their copy machine, their materials, etc. becuase at the end of the year I couldn’t write off ANY of the expenses I had to pay for working with them (gas was the worst considering I was driving all over for theatre programming). For the other companies that had acutal contractors, they were unegotiable 10 out of 10 times. Even though I offered a special skill as an actor who plays piano and can teach music and theatre as well as singing skills, etc., they would have rathered given another teach a boom box and have the kids sing along rather than pay me what I was worth and give the kids a more valuable experience. Since I had no power, I often took the work and did the best I could. Needless to say it was all very frustraing, lots of guilt trips (hello non-profit) . . . which angers me more now that I type that these nonprofits had the gall to pull the guilt trips on their contractors and employees!

    Well, now I’m a temp at a utility. The work is way boring, but it’s more steady and relaiable than what I was doing before.

    Plus, that damn self-employement tax really hurts in January.

  32. Rather Not Say

    I have been a Temp. Contractor for almost a year at the same company I do mostly make my own hours and schedule but I do use their equipment when I first started I was required to come in and work a 9 hour schedule and it has remain the same the entire year, I do not like the way I have been treated here although I love the job and would like a permanant opportunity but I think becoming an employee would stop having them call me a Temp also not inviting me to enjoy Happy Hours or Luncheons or the rest of the things they may have going on in the Corporate world it seems like when I first started I was invited to all these things but since they have a new receptionist or Admin or whatever she may be suddenly the emails have stopped I honestly thing she does not like me because I see other contractors that are here perticipating but if she is singling me out what are my rights, what can I do when I started they told me too that it would be temp to perm and I started on a 90 day contract yet they keep extending the contract without hiring me permanatly, PLEASE HELP WHAT CAN I DO, I feel abused, used and mistreated!

    1. Ask a Manager Post author

      Are you a W2 or a 1099 contractor? It wasn’t clear from the question.

      If the issue is mainly that you want to be invited to happy hours and lunches and haven’t been since the new admin started, just let her know you’d like to attend.

  33. Librarian

    I would love to see the answer to Rather Not Say’s question. I am in a similar situation. My job is exaclty like the job of another person who works here except she is an employee and I am a contractor. We both get paid hourly, but I get paid overtime and she doesn’t. When I was hired almost 2 yrs ago, I filled out a W2 not a 1099. The agency witholds taxes which is fine by me. I’d rather that be the case.

    My main concern with being labeled a contractor is that I am really an employee of the agency and not the company whose office I work in. The employees get much better benefits, more vacation, better health insurance and dicounts in personal mobile phone service. I am not eligible for these things. In particular, the health benefits offered to me thru the agency I am technically an employee of are very expensive and inconvenient (my family’s drs are not in their network).

    I would think that it would be in their best interest to hire me full time rather than pay the agency fee that employees me as a contractor.

    Is there some rule that says if you have me hired as a contractor and I am clearly (according to the IRS) an employee, that after a certain amount of time, the contractor arrangement is being abused and it’s time for the company whose offices I work in to pony up and hire me full time?

    I would REALLY like those better benefits.

    1. Ask a Manager Post author

      In this case, you’re an employee of the staffing agency, which pays you. That’s different than being a contractor being paid on a 1099 (responsible for your own payroll taxes, etc.).

  34. Dan

    Trust your gut, walk away if you still have several months of unemployment left. If not perhaps you could suggest going through an employment agency for a trial period. If you already are registered with an agency then they may cut thier rate to say 25% because they didn’t have to recuit for the position and it is income they would not otherwise have.

  35. Michaela

    I am going to perform a job interview to a potential future employee. Not sure how to pay for the interview day. Do I have to send w-2? If I interview several people, even for 4 hrs, are they my employees?

  36. Michael

    I can’t find ANY jobs that aren’t doing this contractor scam, it’s an absolute infection. My son works as a regular cook in a restaurant, regularly scheduled hours, he is a regular employee in every sense and doesn’t meet even one of the criteria to be a contractor. He was paid under the table for two weeks, then forced to sign a 1099 or lose the job. The employer obviously just thinks they can get away with it. And my guess is, they can and will get away with it. If my son complains, you can bet he will be fired on the spot for any reason they want (Colorado is a “right to work” state), or they simply won’t schedule him for any hours. The last job he worked as a cook also pulled the same “contractor” scam. He ended up owing taxes; then he was written off the schedule while recovering from surgery from an injury he suffered on the job (but he’s a “contractor,” so no workers comp). Is there a way to deal with this? No lawyer will take this on without a big retainer; these are low-paid service workers, no one cares about them.

    1. Grace

      @Michael:
      1. File a fraud complaint with the IRS online with the IRS
      Whistleblower Unit. (They will send you the award forms
      and you can potentially get up to 30% of that the feds find
      they were owed in back taxes.)
      2. The IRS and most of the states have tax fraud sharing agreements, because the feds and the states want their revenue.
      3. File fraud complaints with your state regulatory agencies
      (Unemployment Insurance, Workers Compensation, OSHA,
      Division of Labor Standards Enforcement).
      4. Ask a free legal question to attorneys in your jurisdiction
      on www dot avvo dot com (you will want to choose employment
      law)
      5. It sounds like it could also be a wage/hour class-action lawsuit.
      6. File a complaint with the US Department of Labor.
      7. File a complaint with your state Attorney General’s Office.

  37. Incredulous

    Hard to believe this CEO doesn’t understand the difference between employee and contractor, since she explicitly doesn’t want to pay overtime (an exempt employee thing), but wants you to do unpaid work as a contractor? Maybe I could try that to see if I can get my doctor, dentist, plumber, car mechanic, etc. to do extra work for free.

  38. Not so unusual

    This is a very common problem in the tech industry, misclassifying employees to cheat them out of benefits and taxes. Same with “salaried exempt” label, to avoid paying overtime, yet docking pay when working short hours, like an hourly employee. Can’t understand why IRS won’t crack down on this.

  39. Some owners are weird

    I interviewed for what seemed like a pretty interesting job. But shocked when the offer consisted of 60% base pay, with the remaining 40% as a “bonus” after one year, provided the owner was satisfied with my performance. Although the %100 was a decent offer, I declined, even though I was unemployed and collecting UI. Never reported the offer, since I didn’t want to get into a hassle. But felt entirely justified, since the job was 200 miles away, had to pay my own relocation, and would have been working for almost half former pay. Plus the town was nowheresville for the type of work I did. Never regretted it, got a better offer a while later with a good company.

  40. Thank You for Your Time

    Hello,

    I live in Missouri and for the past year I’ve worked full-time as a graphic designer for a company. I went to work everyday, had my own office computer, laptop, etc. I was paid hourly.

    I did a great job and I even got a $5 raise a few months ago. Yesterday I got pulled into the office and my boss told me, “You have been doing a great job, but there’s not enough work for you… so we will not need you after Christmas.”

    I said, “Are you laying me off?”

    The boss said, “No, we would like to keep you on as an independent contractor and you can work from home.”

    I said, “I have been working 40 hours a week, how many hours will get as a contractor?”

    The boss said, “No idea, sorry.”

    I then said, “Well I can’t work from home because I don’t have a computer, can I use the company’s laptop?”

    My boss said, “No, you will not be able to keep the computer.”

    I strongly believe that the company I’ve been working for is trying to cheat me out of unemployment by calling me an “independent contractor” even though they don’t plan on giving me any work.

    Is this fraud? Is there anything I can do and what are my chances of getting unemployment until I find another job?

    I would be SO GRATEFUL if you could give me advice on this, thank you very much.

  41. t

    I currently work for a company that calls all there employees contractors. Is this legal they make all the rules like when we work where we work we are not allowed to make our own hours they don’t give benefits and we get ass chewings if we dont show up to work there yard. Is this legal.

  42. Grace

    @t

    Why don’t you post your question on the legal website www dot
    avvo dot com under employment law for your area?

    Also the IRS has a Whistleblower Unit where you can file an
    anonymous online complaint (the IRS will email you the claim forms and you can be paid up to 30% of what the government
    finds they are owed in back taxes). Ditto for the states: Unemployment,Division of Labor Standards Enforcement, Workers Compensation, OSHA, etc.)

  43. Similar Situation

    I am in a similar situation. Only I have been working for this Start-up for 6 months. My employer hasn’t had me fill out any paperwork. As filing taxes nears, my employer wants to treat me as a 1099. Without getting into too much detail, I know I am not an independent contractor. I have to travel, I’m listed on our companies site as an employee, and I have every-day customer related tasks to complete. Talking to investors/people, he refers to me as our only employee. I get paid by company check and he doesn’t with-hold taxes. I have been putting money aside, knowing I will owe the IRS money. How do I protect my own ass and what do you recommend I tell my employer? I am frustrated with his management and will probably leave the company soon.

    Thanks Grace, I read your advice and posted my question on avvo!

  44. Jimbo

    The question of employee vs. contract labor can be as clear as mud at times. If you Google Revenue Ruling 87-41 you can read the things the IRS takes into account to determine if you are either an employer or independent contractor. An independent contractor loses a lot. You are forced to pay 100% of income taxes, plus 100% of self employment taxes (SS and Medicare). You aren’t eligible for unemployment as the employer doesn’t pay into it. Forget about workman’s comp if you get injured on the job. This is the way employers can cut costs, and they will often times try it, especially with younger people. Read the 20 factors as stated in the revenue ruling. If you determine you are an employee and the employer treats you differently, fill out an SS-8 and file it with the IRS. If your still employed by this company, you may not be for long. Sometimes using tact will get the employer to see you aren’t that stupid. Hand them a copy of the Revenue Ruling and ask them how you fit in as contract labor. Also, if you are an employee, you can’t be treated as anything different in a probationary period. From day 1 you are an employee.

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