Independent Contractor and WC

HRinGA

I think I know the answer to this but want to clarify.
A business brings "Joe" on board to operate equipment for a land clearing job. They will pay him by the hour. His directions are simple, in that they show him the area to be cleared and give him the bulldozer to operate. During down time, he may help out with chainsaw work. He does not drive for the company or perform any other functions. Depending on how well he performs, they may ask him to work on another job. They want to 1099 him. If "Joe" injures himself, what is the company's responsibility? Would they be responsible since he is not an employee?
Note: This is a small company and "Joe" would clear the land. 2 other guys rotate driving a truck during their off days.
They are all being 1099. Is this ok?
(this is obviously a personal question. Trying to help out a friend)They do not want to hire these folks a) no payroll ppwk b)no workers comp.

LivindonSouth

I don't think this passes the IC test.

Shadowfax

Independant contractors carry their own insurance.If Joe does excavation work for others, then presumably he could do it for you, even with your equipment, but his pay must be dependant on the outcome, not the time spent. 'We need the property graded to ____ specs and readied by__/__/. What will it cost?' Then get out of his way and let him do it. But be sure you have copies of his insurance on file. If he gets hurt, who Pays? Depends, but he will probably try to bring you back in in any event. Why not go out and hire a real contractor, with his own equipment and associated costs. If yhou are just one job in the many he does all year, you will be in a lot better shape. What you contemplate is, in my opinion, not going to fly.

marc

Our WC carriers require us to show proof of WC insurance by this type of third party contractor. They don't give a rat's behind about the IRS, but if we don't have proof of this guys insurance, our WC carrier will charge us.

As Don and Shadowfax both said, this does not rise to the level of an independent contractor - you are just borrowing trouble. Plenty of that will come your way without looking for it here.

HRinGA

That's what I thought. The comment made by the owner was if "Joe" hurts himself, he'll put me out of business. That's part of the risk of doing business I guess.

What about the truck drivers? these guys are firefighters and work for him on their off days. They each work about 2-3 days a week. All they do is pick up a load and take it to the dump. Back and forth all day. He pays them a daily rate. In your opinion, would this fly?

marc

Same answer - if they are doing this as a business, then they should have all the things being in business includes.

The firefighters in Sun City moved my folks during their off days. They had the whole Magilla - trucks, uniforms, business cards, business license, etc - carried their own insurances - which we checked on.

If these firefighters are not really in business, your company would face the same exposure here as in the first situation you described.

LivindonSouth

Marc is right. It's all about exposure. I sense that what your boss is trying to do is make his own life simple by not putting people on the payroll and bellying up to obligations. But, it's not worth the real risk he is taking to try to maneuver like he's wanting to do. If the firefighters work for him on a regular basis and he assigns and directs the work and provides the tools and supervises them, yada yada, they are simply NOT independent contractors, regardless of the fact that they have another job somewhere else. They are simply and legally part-time employees. How many agencies does he really want to get in trouble with at one time; let's see, Unemployment Insurance Division, IRS, DOL, State Comp Commission, some business lines insurance oversight body somewhere...who did I miss?

HRinGA

Thanks for all your comments. I plan to print this out and show him the risks. Strength in numbers I always say. Well, not always, but most of the time...:)

Geno

1099's notwithstanding, "Joe" and the "2 other guys" are employees for worker comp and tax purposes.

If Joe brings his own bulldozer to work with him, the answer might be different.

When the payer has control over what is to be done and how it is to be done, it is an employer-employee relationship.

An independent contractor relationship exist when the payer controls what is to be done but not the means nor the methods.

Remind your friend that he has already "hired these folks" and that getting it wrong can have serious worker comp and/or IRS tax implications.

An on-the-job injury could prove financially ruinous to your friend's personal assets and an employer who classifies an employee as an independent contractor while having no reasonable basis for doing so can be held liable for the employment taxes of that worker.

Tell you friend that unless he is the gambling-type, it is never advisable.



Geno, SPHR

Whatever

You should, also, be concerned if Joe hurts someone else. Joe should have both wc insurance and liability insurance and your company should be named on a certificate of insurance (which is required by our insurance carriers and is a part of the insurance policies when we use an ic). The risks of trying to have the best of two worlds (Joe is neither an ee or an ic) could result in a disaster.

E Wart

In GA these folks would probably not have w/c insurance due to number of people employed by "their company".
I really don't see any way except that these are your employees, temporary part timers may be, but your employees. It sounds to me that your company doesn't want to pay their social security, increase your worker's comp costs/exposure, and unemployment taxes, etc.
I don't see why you don't hire a "full fledged company with their own tax ID no. and insurance" to do this work.
You may find that the firefighters have their own company (many do to perform "odd jobs" outside of their normal firefighting work) and you should have an agreement/contract with their company and pay their company accordingly just like you do Fed Ex or whomever every week/month.
The only other suggestion I have is to contact a "temp agency" and see if they will "payroll them" for you and they would be the temp agencies employees. Probably won't do the fellow who drives equipment, but might the firefighters.
E Wart