Whether you are classified as an employee or a sub-contractor may have significant legal and tax obligations. Many people don’t realize that there’s a difference between employees and sub-contractors in Indiana. However, sub-contractors or independent contractors as they are often referred to, don’t receive the same legal protections from the government and don’t have the same rights in the event that you are not paid for your work. Whether you’re an employee or a sub-contractor, you need to spend some time studying the rules and regulations regarding your position and become aware of your rights. If you’re a business owner, it’s even more crucial to distinguish between the two because you have some tax liabilities and obligations.
The Difference Between Employees and Sub-Contractors
Both employees and independent-contractors provide services to you and both get paid for their services. That’s the only commonality between the two types of associates. The IRS states that you can distinguish between employees and independent contractors based on three different categories:
Behavioral Control – Who determines how much control you have over how the job is done. Is it you or is it your boss? Does the employer provide instructions, methodology, training in that methodology, and directions on how and when to carry out the job. If so, this looks and smells like an employer/employee relationship. However, if you are independent, can control the scope of your own work, then your job has the characteristics of an independent contractor.
Financial Control – Who controls how you are paid? Do you bid for the work and then submit a bill or invoice? Or, are you paid an hourly wage? In some industries it may be more difficult to distinguish between independent contractors and employees. Who controls how and when the worker is paid, how they’re reimbursed for equipment used and services rendered, and who bears the profits and loss, etc. An employee can fully expect the employer to provide all necessary tools and equipment to perform their job, and to reimburse them for wear and tear of the equipment they might bring to the job. For example, an employee drives to different locations in their personal car to perform their job might expect to be reimbursed by the employer for the fuel, maintenance and repairs. However, and independent contractor is considered self-employed and must pay all of these expenses out of their pocket. These expenses aren’t considered the business owner’s concern. Think of an independent contractor as a small business owner.
Relationship between the Parties – The most significant difference between an employee and an independent contractor is their relationship with the employer. Subcontractors should have written contracts for every job they do or for a fixed duration. Employees, on the other hand, typically do not have contracts. They are employed “at-will” but they receive regular pay checks, and have taxes deducted from their pay. Employees also may have benefits associated with their employment such as health insurance, paid time off, and reimbursements for expenses
Why Is the Classification Between Employee & Independent Contractor Important?
This classification is very important because it impacts how you file your taxes. Here’s a brief description of your obligations based on whether you’re an employer, employee or a sub-contractor:
Employee – If you’re an employee, your employer is responsible for paying your social security and employment tax obligations by withholding the amount from your wages or salary. In return, you won’t need to concern yourself about the obligatory payments to the government.
Independent Contractor – If you’re a contractor, you’re responsible for your own self-employment taxes, which must be paid quarterly.
Employer – As an employer, the distinction is very important because you’ll need to pay the taxes, social security, and insurance on your employee’s behalf, and you will issue them a Form W-2 at the end of each year. You can deduct the needed amount from your employee’s salary and compensation. You will also have to pay state taxes and federal unemployment taxes on behalf of your employees. If you have independent contractors working for you, you are not required to withhold payroll taxes, and you will issue a Form 1099 at the end of the year.
Because it seems simpler to hire independent contractors, employers often misclassify their employees as such in an effort to avoid paying payroll taxes, etc. If you are found to be misclassifying your employees as independent contractors, you may be subject to fines and penalties issue by the US or Indiana Department of Labor.
Reporting the Earnings of Employees & Independent Contractors
As a business owner, you need to report every employee and independent contractor you have on hand. You also need to make sure you have classified them correctly. The Department of Labor is very stringent on the difference between an independent contractor and an employee. In fact, they have cracked down on entire industries that try to misclassify employees as independent contractors. You are also required to pay employees overtime for every hour over 40 hours in a given week. Overtime is 1.5 times the amount of your regular hourly rate. This is another reason why employers seek to classify their workers as independent contractors. That is, they are trying to avoid the overtime requirements of the Fair Labor Standards Act.
What Should You Keep in Mind?
There are significant penalties for employer who refuse to pay their employees’ wages. In Indiana, this can be up to 2 times the amount of wages, plus attorney’s fees. Failure to pay an independent contractor does not have these penalties. Rather, this is just a simple breach of contract claim. If you are an independent contractor, it is important to have a written contract. As part of the terms of that agreement, specify that you can seek attorney’s fees if you are not paid. Without such a clause, it may be difficult, and expensive to find an attorney to take your case.
If you believe your employer has misclassified you as an independent contractor, you should contact an attorney immediately. It may be that you want to report the company to the Department of Labor.
For more information on the misclassification of employees, you can seek guidance from the US Department of Labor. https://www.dol.gov/agencies/whd/flsa/misclassification
The Equal Employment Opportunity Commission (EEOC) issued a Resolution mourning the deaths of George Floyd, Breonna Taylor and Ahmaud Arbery last week. In the resolution, the EEOC committed the agency to redouble its efforts to address institutionalized racism, advance justice, and foster equal opportunity in the workplace.
The EEOC advances opportunity in the workplace by enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.
Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases). Most labor unions and employment agencies are also covered. The laws apply to all types of work situations, including hiring, firing, promotions, harassment, training, wages, and benefits.
The anti-discrimination laws provide a limited amount of time to file a charge of discrimination. In general, a person needs to file a charge within 180 calendar days from the day the discrimination took place. The 180-calendar day filing deadline is extended to 300 calendar days if a state or local agency enforces a law that prohibits employment discrimination on the same basis. The rules are slightly different for age discrimination charges. For age discrimination, the filing deadline is only extended to 300 days if there is a state law prohibiting age discrimination in employment and a state agency or authority enforcing that law. The deadline is not extended if only a local law prohibits age discrimination.
If you have questions related to employment discrimination, harassment, or retaliation, please feel free to contact Goodin Abernathy.
What is the FFCRA and Do I qualify?What is the FFCRA and Do I qualify?
Effective April 1, 2020 and continuing through December 31, 2020, the Families First Coronavirus Response Act (“FFCRA”) will require certain employers to provide their employees with paid sick leave and/or expanded Family Medical Leave for reasons related to COVID-19.
There are essentially 2 parts to the Act. Part 1 is an emergency expansion of the Family Medical Leave Act (“FMLA”). Part 2 requires certain employers to provide Federal Paid Sick Leave.
The Act applies to all employers with fewer than 500 employees. This includes both full and part-time employees. This number also includes dual employees, such as those provided by professional employment organizations (PEO’s) also known as staffing agencies. There may be exceptions for “extreme financial hardship,” but the Department of Labor has not yet produced any guidance for what that means.
The Act also provides for a “Distressed Small Business Exception,” which only applies to employers with 50 or less employees. Again, because this law is so new, there is little to no guidance from the Department of Labor as to who will qualify for this exception.
So, what does the FFCRA require employers to do?
Generally, all employers must provide their qualifying employees with:
Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined either (1) pursuant to Federal, State, or local government order or advice of a health care provider, and/or (2) is experiencing COVID-19 symptoms and seeking a medical diagnosis; AND up to 10 additional weeks of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of COVID illness or a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.
FAQ’s about the FFCRA:
How does an employee qualify for these FFCRA benefits?
Some examples include:
- Being diagnosed with the COVID-19 virus.
- Having symptoms of the virus.
- Being required to be in self-quarantine.
- Being ordered by your doctor to self-quarantine.
- Having to care for a spouse or child who is infected with the virus.
- Another common example will be caring for a child whose school or daycare has been closed because of COVID-19 – Or having substantially similar condition based on guidance from the Secretary of Health and Human Services.
Can both parents claim paid leave under the FFCRA?
There is nothing in the law that suggests that both parents would not be entitled to paid leave if they otherwise qualify for the benefits.
Can my employer require me to use paid sick leave before paying benefits under the FFCRA?
It depends. The expanded benefits to FMLA do not kick in for the first 10 days, therefore you may be required to use unpaid sick leave to cover that gap. The mandatory sick leave would not require you to use accrued unpaid leave.
How much pay am I entitled to receive?
It depends on whether you are seeking the expanded benefits of the FMLA, or the mandatory paid sick leave. Normally, a qualifying employee is entitled to 12 weeks of unpaid leave under the FMLA. The new law expands that to include paid leave of two-thirds of base pay based on number of hours normally worked. The maximum is $200 per day, or $10,000 per employee, based on 12 weeks of eligibility.
The mandatory paid sick leave under the FFCRA is capped at $511 per day, with a total benefit of $5,110 per employee.
How are employers expected to pay for these FFCRA benefits?
The government has rolled out several plans to help small business employers pay for these new benefits. One option is a dollar for dollar tax credit for payments made. A second option is a small business loan through the Small Business Administration (SBA) to cover payroll costs. If certain conditions are met, and all of your employees remain on the payroll for a specified period, these loans will be forgiven (they don’t have to be paid back). Lastly, some employers may have business interruption insurance that could be applicable. Definitely check your policy to determine coverage.
Can my employer disclose my diagnosis of COVID-19?
Yes, under certain circumstances, there are exceptions to HIPPAA’s confidentiality requirements. For example, an employer can disclose such a diagnosis for the safety of your co-workers.
What if I contracted COVID-19 at work, will workers’ compensation cover my treatment?
There is much we don’t know about how the new laws will be interpreted, and whether a diagnosis of COVID-19 could be considered an occupational disease. Certainly, for those on the front lines fighting this disease, for instance health care workers, an argument could be made that it is a risk of the job.
If I have to provide these FFCRA benefits, my business will be forced to shut down. Are there any exceptions?
Yes. Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
If I have to take leave, can I get my job back when I return?
Yes. The new law requires employers with 25 or more employees to reinstatement after 12 weeks. If your employer has less than 25 employees they must “make reasonable effort” to reinstate an employee who has taken leave under the Act.
In these uncertain times, it is always best to know your rights. If you have questions about Coronavirus/COVID-19, and your entitlement to benefits under the new laws, please contact us for a free legal consultation. We are not currently taking in-person interviews in our efforts to avoid unnecessary spread of the virus, but we are always available for telephonic consultations.
Once the Charge is filed, it is sent to your employer, and they are given an opportunity to investigate the allegations and file a response. The employer may conduct the investigation internally, or, they may choose to hire an outside attorney to investigate the allegations in your Charge. The employer’s response is referred to as their “Position Statement.” Usually, the Position Statement filed by your employer will deny the allegations in your Charge, and may state other non-discriminatory reasons for any adverse employment action that has been taken against you. For example, the employer may state that you were a bad employee, that you missed too much work, or you did not follow instructions. If this is the case, the EEOC may ask you to provide additional evidence to support your claim of discrimination or harassment.
Once both sides have had an adequate opportunity to state their respective positions, the EEOC may move forward with an investigation.
WILL THE EEOC HELP ME SETTLE MY CASE?
If both sides agree, the EEOC may refer your case for a settlement conference, also called “mediation.” The EEOC has mediators on staff who will help both parties to resolve your dispute.
If both parties don’t agree to mediation, or if mediation is unsuccessful, the EEOC will move forward with an investigation into the allegations in your Charge of Discrimination. They can interview witnesses and request documents from either party to assist with that investigation.
HOW LONG DOES THE EEOC PROCESS TAKE?
Currently, an EEOC investigation can take up to 1 year. However, If the EEOC does not complete its’ investigation within 180 days after you filed your Charge, then you can request that they issue a Right to Sue letter. The Right to Sue letter allows you to file a lawsuit against your employer. It is very important to remember that you cannot file a lawsuit against your employer until you have received the Right to Sue letter from the EEOC.
Upon receipt of your Right to Sue Letter, you have 90 days in which to file a lawsuit against your employer. If you don’t file suit within 90 days, your claim will be barred.
What should I do if I feel I am the victim of harassment or discrimination?
The most important thing to do if you believe you are the victim of harassment or discrimination is to report it to your employer, preferably in writing. If you don’t report, your employer can always deny that they knew that any harassment or discrimination was occurring. Many employers have a handbook which should contain the company’s policies and procedures for reporting discrimination, harassment, or a hostile work environment. If you report harassment or discrimination, and your employer does not remedy the situation, please call me for a free consultation.
Generally speaking, an employer must pay its employees for the work that they perform. This is true whether you are paid hourly, salary, commissions, or by the piece, or any other method for determining the amount. In Indiana, these wages must be paid either twice a month (semi-monthly) or every two weeks (bi-weekly). Failure to pay wages earned can result in penalties for the employer up to two times the amount of unpaid wages, plus attorney’s fees.
In Indiana, if you are an hourly employee with an agreed upon wage, your employer is obligated to pay you for the hours you work within ten (10) days of the payment period end. For overtime, an Indiana employee is entitled to 1.5 times his or her hourly rate for any of the hours worked past a 40 hour work-week. If an employer does not make these payments, an individual may have what is known as a wage and hour claim.
Indiana has two statutes, the Wage Claims Statute, Indiana Code §22-2-9, and the Wage Payment Statute, Indiana Code §22-2-5. The Wage Claims Statute is for employees that have either been terminated or are in a labor organization dispute. Individuals with a claim under the Wage Claims Statute, that is in excess of $6,000 must get approval from the Indiana Department of Labor to file a private suit against their employer. For claims between $30 and $6,000, the Indiana Department of Labor will collect your wages free of charge. If you have a claim for unpaid wages that is less than $6,000 a claim can be made by filling out the IDOL’s Online Wage Claim Form: https://www.in.gov/dol/2671.htm
The Wage Payment Statute is for employees who have voluntarily left employment or are still currently employed.
Under both Indiana statutes, an employee is entitled to liquidated damages ranging from 10% to no more than double the amount of wages due and reasonable attorney’s fees. These damages are in addition to the wages owed. These statutes are designed to pay individuals what they are due. Immigration status does not matter, and it is illegal for an employer to use immigration status as a justification for not paying wages.
The Indiana Supreme Court reiterated the importance of Indiana’s Wage and Hour laws and their importance for all workers who depend on their paychecks to be paid regularly.
“I write separately to observe that the facts of this case dramatize the point that the statute confers on all employees the right to recover treble damages and attorney’s fees for failure to pay wages, regardless of the employees’ circumstances. This is perfectly understandable as applied to the vast majority of workers who are dependent on their paychecks for their day-to-day expenses. These employees need the money currently, not at the end of protracted litigation, and often do not have the economic staying power to engage in a court battle over relatively small amounts. A statute providing one party with treble damages and attorney’s fees is a very substantial deterrent to an employer’s playing fast and loose with wage obligations. As applied to claims of most workers this is very understandable legislative policy.”
St. Vincent Hosp. & Health Care Ctr., Inc. v. Steele, 766 N.E.2d 699, 706 (Ind. 2002).
If you have worked, but not been paid, please contact the employment attorneys at Goodin Abernathy, LLP to determine if you have a wage and hour claim. Your time and effort is valuable – talk to us to determine your options for recovering your hard earned wages.
In the next five years, approximately 25% of our workforce will be 55 years or older. For some people like Bruce Arians, a former Colts NFL football coach, jobs are still opening up (see recent news article here). But how are things going for the rest of our older workers? Are you an older professional that was just fired or handed a severance package?
Demographics show a large portion of the Baby Boomer generation is still working. Whether its because they need to work or because they want to work, many 50+ year olds are not retiring. Theoretically, our federal law protects employment discrimination against workers 40 years of age and older. The law is known as the Age Discrimination in Employment Act, or the “ADEA”. But not all employers follow the law, and it’s much tougher for older workers to find new jobs – let alone financially recover from an unexpected severance.
In Indianapolis, our attorneys see this scenario commonly unfold in the medical industry. Goodin Abernathy LLP attorneys are experienced with pharmaceutical and medical device representatives suddenly facing a “forced retirement.” Typical scenarios show the experienced reps are asked to train new, younger sales people. The trainees tag along, meet the customers and learn the ropes. Then, if they aren’t fired, the older rep’s territory just gets split up. Part of the territory is assigned to the younger worker, while the older rep’s compensation package does not change. This means the experienced worker just trained themselves into a pay cut. You can imagine what happens after a little more time when the younger worker learns the ropes: they’re handed both territories and the older worker is shown the door.
Other times the older, experienced worker gets pushed out or “harassed out” of their position. Their younger managers start building flimsy records of statistical violations. They say the older worker isn’t making enough sales calls; is not attending enough meetings; fails to use the company’s technology correctly, etc.
Behind the scenes, the company’s strategy is simple: replace the higher paid, experienced worker with cheaper labor offered by young workers. The older workers – who devoted their careers to improving the company’s interests – get cut loose by new or younger managers trying to make their own numbers look better.
Another typical scheme involves luring away experienced, older workers from competitors. After the older worker shares her book of business and discloses other proprietary information, the new company abruptly lets them go. The new company just wanted the work intel for its younger reps and never really planned to keep the new, older hire on board.
When companies plug younger workers into jobs and push out 40+ year old workers, the experienced workers should contact our Goodin Abernathy LLP attorneys for an ADEA evaluation.
Contact Goodin Abernathy LLP, and we will tell you how to look for signs of illegal ageism or age discrimination. Consult us and we will explain the legal process for an ADEA or EEOC claim with an eye towards enforcing your legal rights.