subcontractor rights? are there any?

[Pennie]

What is the name of your state (only U.S. law)? Minnesota

a co-worker of mine has been with the company since it's inception and has always been paid under sub-contractor status. Approx 5 years ago, the company was sold with only a partial change in partners/owners. At that time the new owner was made aware of the circumstances surrounding my co-workers employment status and at that time had no issues with it. Along with the majority of employees said co-worker was given an increase of $3hr pay.

In late 2007, the new owner was beginning to show discontent in her pay arrangement and she was approached by the CFO with the suggestion to legitimize their pay agreement by her incorporating herself. At the time, I recall the CFO's concern was the issuance of a 1099. Under the guidance of the CFO, she established herself as a S corp.

two weeks ago she is approached by the the same owner, stating he cannot recall giving her an increase 3+ years ago and is in the throes of a moral dilemma as he cannot say with certainty that she is paying her taxes. Therefore he is taking cell phone reimbusement, a weeks vac & $3hr. back. Upon protest, he agrees to let her keep the cash if he is satisfied she is doing/paying her taxes. Despite the fact she can prove with certainty that her increase is years old rather than an s corp agreement as he claims, and her reluctant willingness to provide proof of payment to the IRS - he now has cut her pay until she provides her actual (confidential?) returns.

I know he owns the company and she has alienated herself from employee rights but can he do this?What is the name of your state (only U.S. law)?

 

[justalayman]

well, the first thing your friend needs to do is find out if she can even legally be treated as an IC (independent contractor)

In late 2007, the new owner was beginning to show discontent in her pay arrangement and she was approached by the CFO with the suggestion to legitimize their pay agreement by her incorporating herself. At the time, I recall the CFO's concern was the issuance of a 1099.

legitimize? I don't understand. If she could legally be treated as an IC, there is nothing to legitimize and she should have been receiving a 1099 all along because she was being treated as an IC.

 

[Pennie]

i know that the s-corp idea came about in response to the question as to whether she had been issued 1099's in previous years. how does this designation affect them anyway? it seems to me that he should not be able to demand to read her returns, but does she have the same rights, or any as an IC?

 

[justalayman]

if she is an IC, she is a separate company doing work for this main company. She has no legal requirement to provide any documents not agreed to by permission or contract.

The company bears no liability for her not paying her taxes. It is none of their business.


and are you saying she has not gotten a 1099 in the past? What form has she been issued that she used to file her taxes with?

She needs to receive either a 1099 or a W2. Since she is claimed to be an IC, she should be getting a 1099.

 

[anteater]

The owner is a bleepin' idiot. And, what is worse is that the CFO is a bigger bleepin' idiot and should know better. If she is a contractor, it makes no difference if she is a sole proprietor or establishes an S Corp. Her tax returns are none of their business.

She is almost certainly an employee and not a contractor and the entire arrangment is illegitimate.
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

That said, if she wishes to continue this little pas de deux, she either:

1) Shows them the tax returns
2) Tells them to bug off and risks being told bye-bye
3) Mentions IRS Form SS-8 and risks being told bye-bye