basics of independent contractor law law offices of matthew s. johnston, llc 122 e. patrick street,...
TRANSCRIPT
Basics of Independent Contractor Law
Law Offices of Matthew S. Johnston, LLC122 E. Patrick Street, #103
Frederick, MD 21701(240) 415-8425
October 29, 2015
© Matthew S. Johnston, 2015
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Law Offices of Matthew S. Johnston, LLC Services
Small Business Focus Contracts, Drafting and Advising Small Business Operations Counseling Outsourced General Counsel Services Dispute Resolution Intellectual Property Law
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Topics in This Session Scaring the crap out of you The economic situation vs. regulatory
environment Six (non-exclusive) factors to consider How Employers can protect themselves How Contractors can help Employers What Ifs (because no one asks lawyers
a question without a “What if”)
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
The CMB Slide This session is designed for informational and educational
purposes only. The subject matter is not intended to be legal advice.
The discussions should not be construed as legal advice.
No discussions between attendees and I are considered to be privileged communications.
NO attorney client relationship is created as a result of your attendance at this session.
If you need confidential legal advice you should consult an attorney.
Like this Guy
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
The Scary StuffWhen talking about independent contractors, really talking about employee misclassification liability
Improperly classifying workers as ICs rather than employees means liability to workers AND Gov’t
Employees get back wages/benefits, Gov’t gets back taxes, UI, and Worker’s Comp premiums, + fines
Even if you settle with the employees, the Gov’t can still pursue its claims and get triple damages for willful violations
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
The Scary StuffEnd Result is Employee Misclassification can mean tens of thousands, hundreds of thousands, or even millions of dollars—effectively putting you out of business.
However it is not all doom and gloom
Proper consultation, due diligence, advance planning, and a good independent contractor agreement can still work.
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Why Does this Matter? Workers in “gig economy” want freedom/independence Some workers accept the consequences of their choice,
others have had little or no choice in the past. Government was to protect the latter, but often go overboard
on the former Government is starting to look hard a on-demand services,
temporary agencies, and some licensed professions Maryland law, explicitly regulates landscaping and
construction industries. Maryland may be looking soon at home healthcare and home
maintenance/cleaning industries
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Why Does This Matter? Governments want to ensure employee
protections Overtime
Unemployment protection
Worker’s Comp
Tax payments
LABELS DO NOT MATTER It is the relationship between the employer and
worker that matters. Key question: “Is the worker Economically
Dependent on the employer?”
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Independent Contractor Law Burden of proving independent contractor
status is on the employer NOT the contractor. Case law is evolving but generally looks at the
economic realities of the relationship No longer a simple matter of control of ways &
means of working EACH case is very fact dependent and
general rules are difficult to draw, but the courts/Gov’t have a list of non-determinative factors.
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Six (Non-Exclusive) Factors to Examine Integral part of employer’s business Worker’s managerial/entrepreneurial skill affects
profits not just time Worker’s investment vs. employer’s investment in
materials/equipment/software Work requires special skills not otherwise
available Nature of relationship between worker & employer Nature and degree of employer’s control
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Guidance for Independent Contractor Status
No one factor is determinativeGov’t and Courts look primarily at these
factors, but also at the “totality of the circumstances” in the relationship
Remember the bias of government is to find employee status, all parties should act accordingly
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Guidance for Employers 1st Red Flag: significant number of ICs doing the same
work, particularly if ICs outnumber regular employees. 2nd Red Flag, ICs with multi-year engagements and no
other clients If work is integral to your business and you need lots
of labor, consider a class of short-term employees Do and document your due diligence efforts, get EIN
numbers, client references, marketing efforts, and revisit for long term ICs
Document, document, document and then when all else is done, document some more
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
Guidance for Contractors 1st Red Flag: more than 90% of income from one client
over a long period of time. 2nd Red Flag, Any Exclusivity Arrangement Provide Employer with EIN, Client references,
marketing efforts, show you are an independent business
Have a solid, clear, unmistakable independent contractor agreement and FOLLOW IT.
Document, Document, Document and then when all else is done, Document some more to show you are an independent business, help the employer.
© M
atth
ew
S. Jo
hnsto
n, 2
01
5The Law Offices of
Matthew S. Johnston, LLC
For more information, contact:
The Law Offices of Matthew S. Johnston, LLC122 E. Patrick Street #103Frederick, MD 21701(240) [email protected]://johnston-legal.com/www.linkedin.com/matthewsjohnstonwww.facebook.com/LawOfficesMatthewJohnstonTwitter: @msjohnston_law
© M
atth
ew
S. Jo
hnsto
n, 2
01
5
The Law Offices of Matthew S. Johnston, LLC
The preceding presentation is intended for educational and informational purposes. The presentation should not be construed as legal advice. No attorney client relationship is created through the presentation or reading of this presentation.
This presentation may be excerpted, reprinted, or redistributed under the Creative Commons Attribution-No Derivatives 4.0 license (CC BY ND 4.0). No changes may be made to this presentation without the written consent of the author.
All other rights reserved.