layoffs and consultants

hr_dawg

[font size="1" color="#FF0000"]LAST EDITED ON 07-05-01 AT 03:03PM (CST)[/font][p][font size="1" color="#FF0000"]LAST EDITED ON 07-05-01 AT 03:03 PM (CST)[/font]

I work for a large company with plants all over the US. An exempt management employee in a different state at a plant undergoing layoff who is not my direct subordinate has shown extraordinary skills and I would like to continue to use him in other functions around the company. He has already undergone layoff. Unfortunately, my current funding structure prohibits my adding a full time employee right now. What are the wage & hour ramifications of contracting with him on an as needed basis to provide consulting services? I plan on paying him in flat rate services contracts that, in effect, compensate him at a higher daily rate...

Mike Maslanka

like anything else there needs to be a written agreement...a simple letter will do...but if he's never consulted before,he must understand that he can not slip back into his ways as an employee--that is,he must be a true independent contractor...so,for instance,he should not be supervising any of your current employees...most consultants ,like lawyers are paid by the hour,or you may want to consider a turn key price---you get x amount of service for a flat fee...good luck...regrads from texas,mike maslanka

Don Avery

Your potential problem won't be with the FLSA but instead with the IRS.
If you are his only clent and the only one he has ever had, it starts to look shakey. Especially if he does not carry his own performance liability and workers comp. insurance. Will he perform all of his work on Company premises and under some supervision? In an IRS audit, they look closely at employees who terminate and suddenly appear as ICs.

Gillian

The key item as whether a person is an employee or an independent contractor is control - who controls the work and how it is done - you or the person doing the work. If you would like a copy of the IRS 20 factor list which is a guide e-mail me with your FAX #a and I'll send it to you - [email]shugh@westernu.edu[/email]. You should make sure that you do this one right - the penalties for not paying payroll taxes are severe and you don't want to mess with the IRS.