Various questions and answers about the work (Part 2)

What are the Laws of Independent Contracting?

I’ve worked for a Fortune 500 company with thousands of employees for 6 years. They furnished the equipment, told me what hours to work and not to work so basically I was an employee without the benefits(medical, retirement vesting after 5 years, sick leave, vacation, etc.). Do I need to retain a lawyer? I thought independent contracting, you set your own hours and contract services rendered not be paid hourly wages.

Rita Risser’s response:

Hmm, have you been working for Microsoft? They lost a huge case because they were using “independent contractors” in the same way as employees, denying them benefits, etc. The court held that Microsoft was liable to pay them back benefits, including contributions to the 401(k) plans!

Independent contractors are determined to be independent based on 20 factors from the Internal Revenue Service (see IRS publication 973). Two of the factors are setting hours and being paid by the project rather than hourly. But there are another 18 factors to go. They don’t have to meet all 20, or even 10, but the balance must be on the side of independence. You definitely should talk to an attorney.

How do we keep temps temp?

What type of conditions should a company consider to avoid a temporary agency employee being considered as a regular company employee? This to avoid the temporary employee being considered a regular employee for purposed of workers comp., termination, discrimination, union elections, etc. Thanks.

Rita Risser’s response:

The best way to protect yourself is to keep temps for a limited period of time, no more than one year. After that, they would have to go to another company (not another position/manager within your company). If they are good enough to keep for a year, you should make them regular employees.

In addition, you should treat temps the exact opposite from how you treat employees. Do not give them regular reviews and feedback; instead, give feedback to the agency which then passes it on to the temp. Do not coach, counsel or warn before termination. Do not allow them to participate in general training or general planning sessions; it is okay for them to attend training/planning programs specifically related to their jobs. Do not allow them to participate in general employee events (picnic, holiday party). It is okay for them to participate in a birthday or other celebration within their immediate work area.

Do not give them employee recognition awards. However, it is permissible to give them temporary worker awards, partner awards or other similar recognition.

Microsoft loses independent contractor case — again

Last year, the Ninth Circuit federal Court of Appeals ruled that Microsoft had improperly classified employees as independent contractors. The workers at issue were employed for as long as two years, performed a variety of tasks, worked side-by-side with regular employees, had card access keys, computer passwords, and in almost every other respect were treated like employees.

Microsoft asked the Court for a rehearing, and on July 24 ruled that these workers were employees as a matter of law and thus entitled to participating in the Microsoft pension and profit-sharing plans.

High tech and other companies that use “independent contractors” on a full-time basis for more than one year could very likely be in violation of the law. This case establishes that not only are such workers entitled to have the company pay back taxes and FICA not withheld, but also to participate fully in company benefits.

Microsoft loses on independent contractors

In a textbook case of the wrong way to do things, Microsoft Corp. lost an IRS ruling about its use of independent contractors, reclassified the contractors as temps instead of making them regular employees, and then refused to pay them employee benefits. The federal Ninth Circuit Court of Appeals decision upholding the right of these “temps” to receive employee benefits is fairly dripping with sarcasm about the sham attempted by the company.

The court noted that although the “freelancers” were hired to work on specific projects, most of them had worked on successive projects for at least two years. During that time, they performed services as software testers, production editors, proofreaders, formatters and indexers. The Court found, “Microsoft fully integrated the plaintiffs into its workforce: they often worked on teams along with regular employees, sharing the same supervisors, performing identical functions, and working the same core hours. Because Microsoft required that they work on site, they received admittance card keys, office equipment and supplies from the company.

“Freelancers and regular employees, however, were not without their obvious distinctions. Freelancers wore badges of a different color, had different electronic-mail addresses, and attended a less formal orientation than that provided to regular employees. They were not permitted to assign their work to others, invited to official company functions, or paid overtime wages. In addition, they were not paid through Microsoft’s payroll department. Instead, they submitted invoices for their services, documenting their hours and the projects on which they worked, and were paid through the accounts receivable department.”

Given these facts, the Court said, they were considered employees and entitled to benefits.

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