You Decide Template
Name Victoria Berahmandpour Date 01/23/13

Scenario Summary:
Karen works as a consultant at local utility. She was started five years ago for a project. Her job was to develop training materials for an upcoming session on diversity. Her manager, Cynthia, was happy with her work and asks for more projects.
Karen was based on salary of $10,000 per month. She has received a 1099 for her wages for last five years. Because she was contractor, she didn’t receive any benefits. After Karen’s husband passed away, she did request for benefits, which was refused because she had contract with the utility. However, she was doing work like other regular employees in human resource department.
Karen has had other limited clients over the years. She had one client for an approximately 40-hour project two years ago, and she currently has another client that keeps her on a retainer basis.

Your Role/Assignment:

Your role is to decide if Karen is an independent contractor or an employee and discuss some of the preventative and ethical situations that are occurring in this case.

Questions:

1. Do you feel that Karen is an independent contractor or an employee? What is your rationale for this decision?

I think that Karen should be considered an employee of the company. She has been working for the Utility Company for five years and she has been received salary. She was started as a contractor to develop training material for upcoming session on diversity. However, she worked for more projects that were given by her manager because she liked her job. So, she was working full time, 40 hours per week. I believe that the characteristic of her job and duty belongs to the regular employees.

2. What factors do you feel help contribute to Karen being an employee?

Based on 20-factors analysis and determination of form SS-8, she Some of 20-factors that apply for Karen are as follows:

* Integration: Workers whose services are integrated into business operations or significantly affect business success are likely to be considered employees.

Karen was doing several projects continuously for the human resource departments which begins a project to develop training materials for an upcoming session on diversity and then her manager liked her work and ask for more projects.

* Extent of personal services: Companies that insist on a particular person performing the work assert a degree of control that suggests an employment relationship.

Which I mentioned above that Cynthia, Karen manager, gave more projects after the first one. So, her work has been controlled by managers, which gives power of employment relationship.

* Continuity of relationship: A continuous relationship between a company and a worker indicates a possible employment relationship.

Karen has been working for Utility for five years. So, this is another evidence of her status as an employee.

* Flexibility of schedule: People whose hours or days of work are dictated by a company are apt to qualify as its employees.

Karen has been working for 40 hours a week.

* Demands for full-time work: Full-time work gives a company control over most of a person's time, which supports a finding of an employment relationship.

Karan fit in this category. She was full time.

* Method of payment: Hourly, weekly, or monthly pay schedules are characteristic of employment relationships, unless the payments simply are a convenient way of distributing a lump-sum fee.

Karan work based on salary which was $10,000 per month.

Based on form SS-8, following questions help to determine if the worker is an employee or contractor: * Total number of workers who performed or are performing the same or similar services * Describe the work done by the worker and provide the worker’s job title * Did the worker perform services for the firm in any capacity before providing the services that are the subject of this determination request? * If the work is done under a written agreement between the firm and the worker, attach a copy (preferably signed by both parties). Describe the terms and conditions of the work arrangement. * What specific training and/or instruction is the worker given by the firm? * Describe the worker’s daily routine such as his or her schedule or hours

3. What factors favor her being a contractor?

She was hired as a contractor but written agreement didn’t mention in the scenario. She filled form 1099 but not W-2. She hired as a temporary employee for Utility Company after her first project. She never mentioned to her supervisor that she’s been qualified as an employee. Also, her net paycheck was $10,000 without deduction of taxes. Otherwise, there is not enough document support that she is a contractor. She also had another client two years ago for 40 hours and she currently have another client that keeps her on retainer basis. However, these jobs not cover 2/3 of her time, mostly she spend 40 hours at Utility Company.

4. What are some potential legal implications in the case? What should the utility do to rectify any wrongs in this situation?

Potential legal implications are related to government taxes such as Medicare, Social Security, Federal taxes, and benefits that have to be pay since the beginning of Karen job. In addition, other benefits such as 401k, vacation, seek pay, and other benefits that offered to regular employee. In Karen situation, if the case goes to court, the Utility Company has to pay penalties as well as attorney fees and etc. So, it is better that employer talk to the tax advisor and makes all backup pays and taxes and make it right.

5. Draft a sample policy for limiting the use of independent contractors that will help avoid issues like this in the future.

Sample Policy for limiting the use of independent contractors:

* Written document: specified title of job, requirements, specified the time and amount for the project.

* Agreement that worker’s control over her/his performance and the outcome to be produced.

* The independent contractor should be paid on the basis of the nature of the job completed, rather than the hours worked to complete it.

* No training should be offered to an independent contract

* Offer and extend option to purchase benefits with the company and explain at what rate(s)