Misclassification of Salespeople

FYI:

To all Roofing companies or storm chasers who are classifying their salespeople as 1099 Independent Subcontractors you are operating illegally and will be audited by the State and IRS.

The State can require the employer to pay back withholding taxes and unemployment taxes. If the employer is a corporation or LLC, the State can hold the officers of the corporation or company members personally liable for any unpaid payroll taxes.

If you are a salesperson and you only represent one company, are the face of the company to the customer, and present a contact to the homeowner with the company's name, then your true classification is a W2 employee.

A 1099 independent subcontractor has multiple companies they work with, is listed in the yellow pages for his/her services, and has their own contracts.

With the Unemployment rates, this is bringing to light the corruption in the Roofing Industry on a State and Federal level. Insurance Commissioners are being educated and are cracking down.

Solution: Run your business correctly and as they penalize others to force them to do things right, it raises the industry to a respectful standard.

Tom....And here the contractors have t shirts made up with the their company name on it........then they make the "subs" wear them so they can tell the customers it is a company employee. You would think a judge would eat these guys up!!

Randy....

Most of the "subs" here in Co., are illegal as well!

It was bad enough when pimps was hiring Mexicans and paying them hourly but calling them subs....now they actually skirt the law pretty good. I seen one particular storm chaser who claimed to do over $15,000,000 in revenue with 4-5 employees. He has at least 35-40 canvassers at every storm I have ever worked. He has subs who do the work.....but he only has to 1099 the lead guy, the guy he hired.

That is the thing now days....as the contractor, you can hire 100 illegals but only pay 1 of them as a sub, and then he pays his help..which is the other 99!! The contractor ends up only needing to deal with 1 person, and he is usually legal, but then pays all the illegals. Now when the contractor is audited by insurance or IRS, all he has to produce is the paperwork for the 1 sub you hired..........it is then on that poor sap to provide documentation on the other 99 when the IRS comes calling.

The contractor walks away with a pocket full of money......and the "sub" gets left holding the bag or else steals a new name and SS#.

Sad but true......that is how it is. I think we should deport them all!

One thing is for certain though....the salespeople are not illegals and can be replaced. The real problem is the illegals.......if you didn't have 30 million illegals working for nothing.....you wouldn't need salesmen misclassified. Cut off the head and the snake is harmless. Just my 2 cents.

I'm with ya Twill59....I've been perplexed at this phenomenon of missreperesenting employees as independent subcontractors since relocating to Colorado in 92'....There's no "red herring"....It's illegal and ethically adverse...PERIOD!

BTW; H@!! yes it goes for "installers", or any other type employee....(DUH?!!!!)

A like phenomenon is big bro's acceptance of hiring illegal aliens w/spurious SS#'s, etc....

Not a joke.

I have talked to a construction attorney, the DOL, and IRS. They are going after roofers. Especially since the whole American Shingle scam hit the Southeast region last year.

Red Herring

If they were to be classified as employees then they are entitled to an hourly wage, weekly paycheck, company vehicle, insurance coverage etc.

To me.......it just seems the government makes everything too complicated. Government and States have this so screwed up. I DO NOT KNOW HOW you could get in trouble for having a 100% commission salesman classified as a subcontractor but yet Dish Network can schedule an installation appointment for the installer and tell him when to be at the install......and he is not an employee, how?

Or how does FedEx have a delivery person be classified as a sub when they do the exact same thing as the employee delivery men? The only difference is the color of the arrow on the FedEx truck(Don't know if you guys know this but that is why FedEx has different color logos).....orange arrow is a sub and green arrow is an employee, or vice versa, and they do the exact same job.

All I can say, is it is no wonder that people classify workers wrong......if a judge can't figure it out, how is the normal Joe suppose to know. I say take your chances if in doubt.....and ask forgiveness, it's easier than asking permission.

They need to start with FedEx, Dish Network & Direct TV............then maybe roofers would learn.

August, 2010. Last Thursday, a federal judge in Indiana threw an obstacle in the way of a lawsuit by Fed Ex Ground drivers, who believe that they are entitled to all legal rights and benefits of employees. In their 5-year long case, the drivers have put forward evidence of employee status, including company requirements of uniform, vehicles, dozens of delivery rules and other evidence of micro-management. But last week, U.S. District Court Judge Robert Miller concluded that FedEx Ground drivers in Kansas were independent contractors and not employees. Contrary to this ruling, the same judge found some Illinois drivers to be employees in May.

The Court, in its 103-page opinion, found that FedEx Ground drivers in Kansas are independent contractors under Kansas law. The case was one of many class action lawsuits that were consolidated before Judge Miller, challenging FedEx Ground’s classification of its drivers as independent contractors. The outcome of the other 27 class action cases remains in doubt, including the California case which follows a court decision there finding that the drivers are employees as a matter of California law. The Court said that FedEx Ground did not retain the “right to control” its drivers, a key aspect of the legal test for employment status, because FedEx only offers “suggestions and best practices” but does not dictate delivery requirements. The decision analyzed FedEx’s contract and written policies, but refused to consider FedEx’s business records showing the drivers’ experiences with FedEx management.

“We are surprised and dismayed by this opinion,” said Lynn Faris, lead counsel for the drivers. “The drivers know that what FedEx may call a “suggestion” is, in reality a mandate, because not following it leads to termination. Plaintiffs presented reams of documents and testimony that demonstrated constant micro-management of drivers by FedEx. There is no doubt in my mind – or the drivers’ minds – that they are required to do what they are told and are, therefore, employees,” she added. “At the very least, there is ample evidence of employment status that warrants a trial.” The Court’s opinion is at odds with the California appellate decision in Estrada v. FedEx Ground, which held that the drivers were employees as a matter of law, and many recent decisions of state tax agencies. “Plaintiffs will certainly appeal this decision. Recently, both the Eight and Ninth Circuit Courts have reversed very similar trial court rulings finding that delivery drivers were independent contractors as a matter of law,” said Faris.

This week, Judge Miller also send 16 cases back to their original courts (in Colorado, Connecticut, Illinois, Massachusetts, Michigan, Mississippi, Missouri, Montana, South Dakota, Vermont and Virginia), declining to rule on the drivers’ summary adjudication motions in those cases. Some of those cases, Judge Miller acknowledged, were governed by laws which create a presumption of employments status. “The upshot of these two rulings means that drivers in some places will be legally employees and in other places, if the decision is not reversed, the drivers will be considered independent contractors. This is a result which, I think, neither side expected or wanted,” said Faris.

twill59 Said: Is this a joke Texasranger? Ive been waiting 21 yrs. for the IRs or SOMEBODY to do something about this. Ifn I wait much longer Ill be out of business....

The reason they don't do something about it is because its a red herring.

I've been paid as a 1099 contractor since 1983 and yes, I've always paid my taxes. If someone were to reclassify me, it would be a wash, tax revenue wise.

Does everybody else pay 48% for all of their employees for workers comp? This is killing me, but I've not been able to find a company who offers lower rates.