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Is this legal ? Employees are all independent contractors ?

DDoug

Diamond
Joined
Oct 18, 2005
Location
NW Pa
Machine shop - business/commercial - by owner - sale

Ignoring the selling the whole shop part, the description of the existing:
"All work to this point has been accomplished by piece work. Independent Machinists bid the jobs with me. Then they can use whatever equipment they want. Their own, mine, or whatever as long as they hit the time and quality points everyone stays happy. All equipment belonging to the business and associated tooling, inspection equipment, computers and programming are included."

So workers bid each job, and then use the owners shop, pay rent somehow, and then get 1099'd ?
 
Short answer, No, when the workers are required to hit a deadline they are no longer independent...Phil

The IRS 20-Factor Test

The IRS has published the following list of factors used by its auditors to analyze whether a worker is an employee or independent contractor:

Instructions – workers who must comply with the business’ instructions as to when, where, and how they work are more likely to be employees than independent contractors.
Training – the more training that the business provides to its workers, the more likely it is that they are employees. The underlying concept is that independent contractors are supposed to know how to do their work and, thus, should not require training from the purchasers of their services.
Integration – workers whose services are integrated into business operations or significantly affect business success are likely to be considered employees.
Services rendered personally – companies that insist on a particular person performing the work assert a degree of control that suggests an employment relationship. In contrast, independent contractors typically are free to assign work to anyone.
Control of assistants – if a company hires, supervises, and pays a worker’s assistants, this control indicates a possible employment relationship. If the worker retains control over hiring, supervising, and paying helpers, this arrangement suggests an independent contractor relationship.
Continuous relationship – A continuous relationship between a company and a worker indicates a possible employment relationship. However, an independent contractor arrangement can involve an ongoing relationship for multiple, sequential projects.
Flexibility of schedule – workers for whom the business establishes set hours of work are more likely employees. In contrast, independent contractors generally can set their own work hours.
Full time required – workers whom the company requires to work or be available full time are likely to be employees as it gives the company control over most of the worker’s time. In contrast, independent contractors can generally work whenever and for whomever they choose.
Need for on-site services – requiring someone to work on company premises, particularly if the work can be performed elsewhere, indicates a possible employment relationship.
Sequence of work – if a company requires work to be performed in a specific order or sequence, this control suggests an employment relationship.
Reports – if the business requires workers to submit regular reports on the status of a project, an employment relationship may be indicated
Payment method – 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. Payment on commission or project completion is more characteristic of independent contractor relationships.
Expenses – independent contractors typically bear the cost of travel or business expenses, and most contractors set their fees high enough to cover these costs. Direct reimbursement of travel and other business costs by a company suggests an employment relationship.
Tools and materials – workers who use company-provided equipment, tools and materials are more likely employees.
Investment – independent contractors typically invest in and maintain their own work facilities. In contrast, most employees rely on their employer to provide work facilities.
Realization of profit or loss – workers who receive predetermined earnings and have little chance to realize significant profit or loss through their work generally are employees.
Work for multiple companies – workers who simultaneously provide services for several unrelated companies are likely to qualify as independent contractors.
Services available to general public – workers who make their services available to the general public through business cards, advertisements, and other promotional items, are more likely independent contractors.
Right to fire – workers who can be fired at any time are more likely employees. In contrast, your right to terminate an independent contractor is generally limited by specific contractual terms.
Right to quit – workers who can quit at any time without incurring any liability to you are more likely employees. Independent contractors generally cannot walk away in the middle of a project without running the risk of being held financially accountable for their failure to complete the project.
 
Machine shop - business/commercial - by owner - sale

Ignoring the selling the whole shop part, the description of the existing:
"All work to this point has been accomplished by piece work. Independent Machinists bid the jobs with me. Then they can use whatever equipment they want. Their own, mine, or whatever as long as they hit the time and quality points everyone stays happy. All equipment belonging to the business and associated tooling, inspection equipment, computers and programming are included."

So workers bid each job, and then use the owners shop, pay rent somehow, and then get 1099'd ?

Oh yes it is. If this kind of thing isn’t happening they have the H1B visas which provide skilled foreigners to undercut educated and skilled Americans.

And we wonder why some Americans want to have their school loan obligations resolved. They lose employment numbers due to workers from other countries. Blame the politicians congress both parties and the employers which lobby for it.

This has been going strong on both practices since the 80’s-early 90’s.
 
Short answer, No, when the workers are required to hit a deadline they are no longer independent...Phil

Trust me, many completely independent contractors still have to meet deadlines set by others. It can be up to them how and when they work, of course. But if there's an event 'showtime', for instance, that's when you've got to be there to do the work.

Wedding photographers are definitely independent contractors, but the whole "I do", bouquet, and garter schedule is controlled by others. Heaven help them if they miss any of those...
 
On contract employees what you can get away with and what the real rules are is a very wide chasm.
Generally 1099 workers will not complain so it all flies under the radar.
Take your local barber. In non-name brand places all are 1099 and self employed.
Use of the chair and space but pays a rent for those to get around the rules, defined hours for sure but technically can't be fired for being late or leaving early although that will certainly happen.
Many people just fine with working in the gray area so one can stretch the rules.
Bob
 
Trust me, many completely independent contractors still have to meet deadlines set by others. It can be up to them how and when they work, of course. But if there's an event 'showtime', for instance, that's when you've got to be there to do the work.

Wedding photographers are definitely independent contractors, but the whole "I do", bouquet, and garter schedule is controlled by others. Heaven help them if they miss any of those...

Agreed. But most independent contractors don't have to share equipment like machine tools and inspection equipment. How the hell does that work? Baddest guy in the shop always meets his deadlines and the rest have to fight amongst themselves for who get what machine time. No thank you. I wouldn't want that situation ever.

Best Regards,
Bob
 
If the employee is working with their own tools and machines, then there's a good argument they're an independent contractor. if you're paying someone to be in your shop making your parts on your machines and your schedule... well.... there's a name for that.
 
I've done the 1099 thing for about a year. His machine tools, some of my own hand tools, my schedule. Filed my 1099 that year no problems
 
Yeah, I would put that on the sketchy gray are for sure. If these "independent machinists" had other shops they worked for and had LLCs or DBAs, did proper invoices, carried insurance, paid rent, etc, then maybe. But as it sits now, just skirting employment laws.
 
LOL that shop has been for sale on CL for years now.

It's a lot of money for a pile of worn out old machines and NO EMPLOYEES in a leased building. You'd think if it was working well one of those independent contractors would have bought it by now.

On the one hand I feel bad when these businesses are slowly dying and the owner is trying to get out, but on the other - you have to really invest in your business if you expect to get something back out of it at the end.
 
This was actually quite common in the mold shops I worked in during the 90's. The last one, from 1994 to 2000, about half of the mold makers were independent. They would bid on jobs but use the shops equipment on an hourly basis. Programming, CNC machining and all EDM was billed hourly. I loved working with those guys. Knew their shit, very dedicated and appreciative of our input and work. I will tell you, working in a shop where 100% of the workers were extremely talented and dedicated people was a joy to work in. (except for some of the egos)The companys owners were at one time very talented mold makers and/or designers. The company made money, the contractors made even more money and we got all the overtime we could ask for, not to mention the higher wages to go with it. It will work under the right circumstances.

Paul
 
This was actually quite common in the mold shops I worked in during the 90's. The last one, from 1994 to 2000, about half of the mold makers were independent. They would bid on jobs but use the shops equipment on an hourly basis. Programming, CNC machining and all EDM was billed hourly. I loved working with those guys. Knew their shit, very dedicated and appreciative of our input and work. I will tell you, working in a shop where 100% of the workers were extremely talented and dedicated people was a joy to work in. (except for some of the egos)The companys owners were at one time very talented mold makers and/or designers. The company made money, the contractors made even more money and we got all the overtime we could ask for, not to mention the higher wages to go with it. It will work under the right circumstances.

Paul

Wow the way independent contractors are supposed to be. Just amazing.
 
There may also be an agreement made,not at arms length ,for the specific purpose of defeating taxation legislation........no matter how contrived......typical of cases where tax lawyers can count on substantial fees over a prolonged period.
 
This is a very slippery slope.
A couple years back one of our employees offered to stop by a business across town on his way home to pick up a alternator for one of our forklifts and bring it in with him in the morning when he returned to work, he left after quitting time and was in his own vehicle ,not company owned. Well as luck would have it he rear ended another car, no one was hurt but we found out that in the eyes of the law he was still working even though he was in his own truck, after hours, the law said he was still working for us as he was on his way to pick up a part for my company. hence still working for us. In the end my company ended up being sued by the fellow he rear ended.
 
Heaven help them if they miss any of those...

I know that. Filmed once at a “friend[FONT=&quot]’[/FONT]s” wedding. When I was set up for shooting dancers after the dinner I waited in vain. The guy was mad at me for the few minutes of footage I had delivered. Imagine, a wedding without music and dancing. It was the sound recordist who was on there with me who said, let[FONT=&quot]’s wrap. It was 16-mm. film and magnetic sound, transfer to perforated mag stock, synch work on a flatbed editor, the whole thing. Never would have expected such a dreary event.[/FONT]
 
I don't know about how they're wording it, but it sounds like a "piece-work" shop. Employee's are not paid by the hour, but by how many pieces they can get done correctly in a day. They're not contractors in that all their resources are held by the company with the exception of the employees skill and time. I've seen it done in leather-working shops and I know it's very common in the textile world.

It's kind of an odd way of doing things IMO, at least in something as technical as a machine shop. I guess if your making T-shirts it works, but it absolutely SUCKS for the new guys as they get totally shafted unless they can figure things out. It's technically fair, but IMO it promotes a very flawed idea of what the workers are worth and doesn't breed any loyalty.
 
Dana gears example is a well established principle of common law........if my son rides his bicycle to the corner shop ,and runs into Thermites Rolls Royce,it depends entirely if I have directed my son to go to the shop ,or he has gone of his own volition......so Thermites attorneys will attempt to establish that I have directed my son to go to the shop ,at which point he has scratched Thermites Roller...And I am liable for the repaint.............This is a very common strategy where a son (or daughter) has a car accident ,entirely their fault ,but has no ability to pay for other parties repairs.......lawyers buy the claim from an insurance co ,and go after the parents.
 








 
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