QUESTION: I'm an hourly worker and have been since I started with my job. My question is can my employer change me from a w-2 to a 10-99 if I don't want that? You have to have worker comp and other insurance to start and that's 2 + months of pay for me. Is this legal what they are doing?
The legality of converting you to what we call a "1099" independent contractor depends on the facts of your employment relationship. Both the IRS and the U.S. Department of Labor (DOL) have lists of factors they look at to determine whether someone is really an independent contractor. Under both tests, the most important factors are, first, whether you are economically dependent on working for this particular employer, and second, whether the company continues to direct and supervise your work, including the methods and means by which you perform your job. Additional factors include, but are not limited to, the following:
--does the employer provide you with the necessary tools, supplies and equipment to do your job, or do you provide your own?
--does the employer set and control the hours you must work, or are you allowed to set your own hours as long as you meet the employer's specifications for the work being performed?
There are also several other important questions on this topic. Since you haven't described exactly what your work is, I can't determine how important some of these other factors might be. I am including a link below to an IRS publication that gives individuals guidance on how to determine if they are properly classified as an employee or independent contractor.
One reason some employers decide to classify workers as independent contractors is to avoid paying payroll taxes and avoid paying overtime compensation for hours worked in excess of 40 in a calendar week. This can save a lot of money for the employer up front, but if the classification is improper, the employer can get into a great deal of trouble with the IRS and the DOL. If after reviewing this IRS publication you believe you should remain a W2 employee, I encourage you to contact the nearest office of the DOL by using this page:
At the top of a page is a map of the US you can use to access a list of regional DOL offices. On that page you will also find a link to more information about how the DOL views the employee vs. independent contractor issue.
Finally, you did not mention what state you work in. That can be important since some states have their own rules about proper classification of workers.
Again, everything depends on the facts of how you do your work and your relationship with the employer. I hope this helps, and that you are able to reach a satisfactory resolution of this situation.
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QUESTION: Thanks for answering my question. I live in south Carolina and I work in the construction side of a water and fire restoration company. My employer dosent make our hr all the time just on big fire losses and demos. They don't provide tools just materials. I get paid by the hr but on average I only get 20 to30 hrs a week. They do sub out a lot of work which is what they ultimately want all of there employees to be"1099". My question here I guess is can they legally change there hourly worker to being sub contractors? There's not anything saying they would even use us and that's everyones fear no one wants to change the way they get paid. It's like being fired with out being fired, am I right or wrong? Thanks again....
If you and your fellow workers meet the legal definition of "independent contractor" under IRS and DOL rules, then the firm would be within its rights to convert you to that status and stop treating you as "W2" employees. But I can't tell you with any certainty whether that is the case without being able to sit down with you and spend about 30 minutes to an hour discussing all the applicable factors about how work is directed and supervised, how your work is evaluated, etc., and looking at any documents you might be able to provide such as the employer's work rules or policies, and anything else related to the subjects I've mentioned. Based on what I know so far, it could go either way.
I think the best thing for you to do is look at that IRS publication and then talk to someone at the DOL. You may also want to contact an experienced employment lawyer in your area, who would be able to have that discussion with you and give you expert advice based on all the facts. It's really hard for me to do that via email, and it wouldn't be fair to you anyway, since any good lawyer will tell you that a face to face meeting is the best way to assess a person's case and give the right advice. If you don't know a lawyer, just do an Internet search on the name of your city and county and the words "bar association referral", and you'll find a web site where you can connect with a lawyer who can help you.
Again, I hope this helps, and wish you the best in getting this figured out.