Thanks for that, I have gone to great pains to comply with the laws involved--simply because it is simpler and (in the long run) cheaper to do it that way. I'll watch my terminology in the future (8^D).
What I was cautioning against was those business who try to classify or re-classify employees, especially obviously hourly non-exempt employees as independent contractors either out of ignorance of the law or purposely as a way to avoid paying employment and unemployment taxes and pay overtime under FLSA.
In a tougher economy, it is a good thing to warn people. The temptation might be there, but the downside exceeds the upside. Re-classifying existing employees appears to be especially difficult, especially if that is employer instigated.
It might be different if the employee walked in one day and said "I'm giving my notice, and I'm starting my own business. Please consider using our services--we can save you money." Even that situation might be brought into question, and the former employee to be would likely have to have their company up and running on the side and have other clients as well before they established credibility as a contractor in the eyes of the IRS if they did work for their former employer.
Where the unscrupulous might hide is behind the ignorance of those they tell they have 'covered', when in reality they do not. If it sounds shaky, it probably is.
Fuhgeddaboudit ; ), A big part of my job now days is in compliance issues so I can be a stickler on terminology sometimes, but I get what you were saying.
In a tougher economy, it is a good thing to warn people. The temptation might be there, but the downside exceeds the upside. Re-classifying existing employees appears to be especially difficult, especially if that is employer instigated.
It might be different if the employee walked in one day and said "I'm giving my notice, and I'm starting my own business. Please consider using our services--we can save you money." Even that situation might be brought into question, and the former employee to be would likely have to have their company up and running on the side and have other clients as well before they established credibility as a contractor in the eyes of the IRS if they did work for their former employer.
I can be done but the same company issuing a W-2 and a 1099 to the same person can raise some red flags with the IRS and down the road with the DOL. In the last year we had a process/materials engineer give her notice because her husband had found a job out of state and they were moving. But her position was not an easy one to fill and the type of work she performed could be performed mostly remotely and quite independently and was the type of work that we could easily outsource. We didn’t want to create a “business presence” in the state she was moving to, open new payroll withholding, unemployment tax accounts and register an office in that state – so we passed it by our outside counsel; a firm specializing in employment law and they determined that we could hire her as a consultant under an independent contractor contract as long as we specified the work she was to perform, noted how it was outside the normal scope of her previous employment and put a time limit on it in the contract.
But then she was a professional engineer with a Ph.D. and was setting herself up as a private consultant in her new state and not formerly a non¬–exempt hourly employee with us. Converting a non-professional formerly hourly employee to an independent contractor, especially if they are doing the exactly the same sort of non-professional and closely supervised and direct work they had performed as an employee is asking for big trouble.