Jan 07
7
Independent Contractor vs Employee
One of the most difficult business decisions you may be faced with is whether or not you are an employee or a subcontractor/independent contractor for someone you are working for.
The IRS website states that:
“The general rule is that an individual is an independent contractor if (the person for whom the services are performed) has the right to control or direct only the result of the work, and not what will be done and how it will be done or method of accomplishing the result.
People such as lawyers, contractors, subcontractors, public stenographers, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case.”
I find that there are many businesses hiring massage therapists as independent contractors to try to save money when they really should be classified as an employee.
It is the person who is hiring that is responsible for knowing what is the correct status because they are responsible for paying taxes if they are an employer and may be required to pay back taxes if they are found to be negligent.
Some of the things to consider when going to work for someone are:
- who pays the taxes
- what are the duties and responsiblities of each part
- Who pays for advertising, massage supplies etc.
- Do you pay a flat rate per massage to the business owner or pay a percentage? It may be illegal to charge a percentage and may be seen as a kickback (for example the law in WA State RCW 51.48.280
Kickbacks, bribes, and rebates — Representation fees — Criminal liability — Exceptions..) - Who collects the money from the client? If the business owner collects it and pays the person doing the massage does it mean they are an employee?
- Do you still get paid when a client doesn’t show up for an appointment?
- Do you have to be there at a certain time and day, wear certain clothes and do certain things? You may be an employee.
- This is from the Washington State Guide to doing business:
“Business owners frequently get confused about
who is an employee and who may be considered to be
an independent contractor.
An employee is generally subject to your control.
Control exists when the employer determines the start
and end times each day, which days the employee
reports to work, what the worker will do on the job and
how they will do it.
Independent contractors are customarily engaged
in their own independent occupation or business, and
are registered or licensed with the appropriate state and
federal agencies. They usually advertise their services,
are in a position to realize profi t or loss as a result of
their services, and usually have a signifi cant investment
in their business. They also keep business records,
report to the IRS as a business and usually have a
place of business from which they operate. You can
expect an independent contractor to provide everything
necessary to complete their job.”
I am not a lawyer and don’t know the legal aspects of all of this, but each case is different and needs to be analyzed by an attorney and a contract drawn up to eliminate any confusion. I recommend having a contract whether you are an employee or a sub-contractor just so you know what the rules are.
From what I have read on the IRS site and the Washington State website, anyone who is told what times to work and what to do is an employee.
This is one of the reasons I think it is just easier to rent office space from someone and run your own business!
I would like to actually hear more about others experiences with this issue and see if we can get a clearer answer and some more definite guidelines to follow when considering going to work for someone.
Resources:
Peick and Conniff - Am I an independent contractor or an employee? (Two attorneys hired by the WA State AMTA to help us figure this out.
Independent Contractor, Employee, Booth Renter: Which Piece Am I? By Ken Cassidy Originally published in Massage & Bodywork magazine, December/January 2002.
Success by the IRSÂ By Dixie Wall, Contributing Editor Massage Today
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