T Nation

Need Advice From an Attorney/Accountant


#1

I am contracted out to United Airlines by a vendor company that for the last 15 months has been paying me as an independent contractor (1099-MISC) however, i have just received an email that all employees will be reviewed and if they dont meet the requirements, will be switched to a W-2.

This is fine by me, but they also said the new contract agreement will include a 10% charge to cover the 941 and unemployment tax required of my employer. I have never heard of an employee having to pay these taxes. Is this legal? Can my employer require me to pay this 10% "charge" on top of the normal taxes that will be deducted from my check as a W-2?

Furthermore, if they are going to make me switch to a W-2 (which they will) but i refuse to pay this "charge" can i hold them in breach of contract?

Just to throw in a little more background information, my contracting company has proven to be one of the shittier ones United uses, and im sure they are only doing this because someone is coming down on them and they are forced to. Up to this point, they have refused to make anyone a W-2 and all employees have been paid as 1099 independent contractors, even though none of us truly are.


#2

I suspect the “someone” who is coming down on the company with whom you have a job is either the IRS or the state taxing authority. You cannot enforce an “illegal” contract…common sense, right. The someone challenged the elements to qualify as independent contracting and by your own admission, it failed.

{FYI While the tax advantages available to self-employed (independent contractors) in things such as 1. retirement savings and 2. capital asset write-offs to name two are preferable, these are not available as an employee.}

As a self-employed, you alone were responsible to pay the payroll taxes which are (generally) the “941” to which your company alluded. (IRS Form 941 is the paperwork an employer (read self-employer or employed by someone else) submits to account for federal payroll taxes; the states have similar paperwork.) FICA (Social Security and Medicare taxes) comprise the greater (15% tax)portion of all payroll taxes (**additionally there are federal and state unemployment and state disability and other surcharges.)

So while you alone were responsible for paying payroll taxes as an independent (self-employed) contractor, as an employee you and your employer now share the cost. The tax cost to your employer will amount to 10% (one-half of the FICA 15% (7.5% + the additional taxes mentioned above**) and much more with Obamacare just for the privilege of having you as their employee. Your employer is informing you of the payroll tax cost to you (the other 10%) under your new status as an employee.

Of course, we were just discussing ‘payroll taxes’ you alone continue to bear the ‘income’ tax. Reason enough for all of us to demand tax reform.


#3

I don’t know your personal situation, but as discussed in the previous post, if your status is changing to employee the tax law dictates the share of payroll tax imposed on the employer and employee. Before as a self-employed person you were responsible for the whole share even though it wasn’t deducted from your check, which is a pretty big chunk of the tax you would owe if you make less than a couple hundred grand a year. So this might be a benefit to you. Also, “employees” are entitled to “employee” benefits and have favorable protection under some wage and hour and anti-discrimination laws.

If your status is changing, I suspect they got sued by someone for misclassifying you or someone like you as an IC or a lawyer in house figured out they were exposed. There are a couple of “tests” under the law depending on where you live and whether the issue is state or federal–like the “duties” test or the “control” test–to determine whether you are really an employee regardless of how your employer classifies you. “Misclassification” can result in liability for back wages, back taxes (to the government for failure to withhold), and back benefits if the misclassification resulted in the failure to meet wage, tax, or benefit obligations.

If they are making you pay all or part of their share of the payroll tax, that’s not a breach of contract, that’s a violation of tax law. I doubt they are doing that, but if they are they have a problem.


#4

Here is a link to some misclassification issues:

http://www.dol.gov/whd/workers/misclassification/


#5

[quote]jjackkrash wrote:
Here is a link to some misclassification issues:

http://www.dol.gov/whd/workers/misclassification/[/quote]

You might want to see a wage-and-hour/benefits lawyer to see how they have been fucking you. There is a limitations period on back wages and every day you wait means less money you can recover if they have been violating the law in some other way.


#6

Thanks for the advice guys, i did get more info on this, they were blatantly going to rip me off, but its not a problem anymore as i received a better job offer somewhere else and just informed them this morning that monday will be my last day.

Damn i didnt know quitting a job could feel so good.


#7

[quote]audiogarden1 wrote:
Damn i didnt know quitting a job could feel so good. [/quote]
It feels really damn good.


#8

[quote]spar4tee wrote:

[quote]audiogarden1 wrote:
Damn i didnt know quitting a job could feel so good. [/quote]
It feels really damn good.[/quote]

I mean, im more happy that im quitting my current job, than i am about being offered the new one lol.


#9

^^ haha, well good luck with the new job. Glad you can leave this shitty one behind!


#10

Congrats!!! Fuck shitty employer’s.


#11

Thanks, and im getting out 2 weeks before i wouldve gotten nailed with what is essentially a big fat illegal pay decrease.


#12

[quote]audiogarden1 wrote:
Thanks for the advice guys, i did get more info on this, they were blatantly going to rip me off, but its not a problem anymore as i received a better job offer somewhere else and just informed them this morning that monday will be my last day.

Damn i didnt know quitting a job could feel so good. [/quote]

You might want to see a wage-and-hour/benefits lawyer to see how they have been fucking you. There is a limitations period on back wages and every day you wait means less money you can recover if they have been violating the law in some other way.


#13

[quote]on edge wrote:

[quote]audiogarden1 wrote:
Thanks for the advice guys, i did get more info on this, they were blatantly going to rip me off, but its not a problem anymore as i received a better job offer somewhere else and just informed them this morning that monday will be my last day.

Damn i didnt know quitting a job could feel so good. [/quote]

You might want to see a wage-and-hour/benefits lawyer to see how they have been fucking you. There is a limitations period on back wages and every day you wait means less money you can recover if they have been violating the law in some other way.[/quote]

I dont think they were fucking me previously, but they were about to start next pay period. Thats why im glad the timing of this thing worked out as it did.