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How Can You Tell a Common Law Employee From an Independent Contractor?



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Delivery driver using tablet in van with package on seat

Independent contractors can be an invaluable addition to your workforce. But how can you be sure the person you’re contracting with is truly independent?

It’s not simply a matter of mutual agreement. You can sign a contract with someone specifically creating an independent contractor relationship that won’t hold up in court because the person is a common law employee.

Misclassifying a common law employee as an independent contractor is a major liability, exposing your business to potential lawsuits, penalties, back taxes, and audits. It can also damage employee productivity and morale. The longer the errors go on, the bigger the risk grows.

Before you contract with any worker, you need to know the difference between a common law employee and an independent contractor.

Overview: What is a common law employee?

The Internal Revenue Service (IRS) defines a common law employee as “anyone who performs services for you … if you can control what will be done and how it will be done.”

If you’re thinking the last half of that definition could use a little fleshing out, you have a very good point. Anytime you hire someone to do work, you control some aspects of “what will be done and how it will be done.” You don’t just hire a kid to mow any lawn on the block, right?

So, how much control can you exert before a worker becomes an employee?

Common law employee vs. independent contractor: What’s the difference?

The difference between independent contractor and common law employee rides on the control and independence evidenced in the relationship. You may be accustomed to taking a very hands-on approach to managing employees. Contractors require a different approach.

This is important because common law employees must be

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Denver shooter was a sub-contractor, not employee: Pinkerton

The Pinkerton detective agency said Monday that accused Denver “Patriot Rally” shooter Matthew Dolloff worked for a contractor and was not directly employed by the famed firm.

“We take loss of life in any situation very seriously and our hearts go out to those impacted by this situation,” the company posted on its Facebook page. “As it relates to the incident in Denver on October 10, the agent in question is not a Pinkerton employee but rather a contractor agent from a long-standing industry vendor.”

“Security professionals often serve as guides to protect media crews during potentially dangerous situations or hostile environments,” the statement said. “We are fully cooperating with law enforcement authorities in their investigation.”

Dolloff, 30, who was hired by a local TV station to protect its news crew while covering a right-wing demonstration on Saturday, shot and killed US Navy veteran Lee Keltner in a confrontation with Black Lives Matters protesters.

The station, 9News-TV, said Sunday that they contracted Dolloff through Pinkerton and said they had enlisted security “for a number of months” to protect employees while covering BLM protests and related rallies.

Matthew Dollof is taken into custody after fatally shooting another man in Denver
Matthew Dollof is taken into custody after fatally shooting another man in DenverDP

Late Sunday, KCNC-TV reported that Dolloff was not licensed to work as a security guard in the city when the fatal incident took place.

Pinkerton did not identify the subcontractor that employed Dolloff.

Officials at Denver County Court said Monday that Dolloff made an initial court appearance on Sunday and was due to be arraigned in district court. His criminal complaint was ordered sealed by a judge Sunday.

It was not immediately known when the arraignment would take place.

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‘Employee’ or ‘independent contractor’? DOL proposed definitions could save companies millions

A new U.S. Department of Labor proposal aimed at clarifying whether workers should be classified as “employees” or “independent contractors” could have a major impact on how companies do business and pay their workers – although there are a number of “ifs” associated with the proposition.

“The Department’s proposal aims to bring clarity and consistency to the determination of who’s an independent contractor under the Fair Labor Standards Act (FLSA),” said Secretary of Labor Eugene Scalia. “Once finalized, it will make it easier to identify employees covered by the Act, while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.”

“The rule we proposed today continues our work to simplify the compliance landscape for businesses and to improve conditions for workers,” said Wage and Hour Division Administrator Cheryl Stanton. “The Department believes that streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility.”

Announced on Sept. 22, the DOL’s proposed rule would:

  • Adopt an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee)
  • Identify and explain two “core factors” — specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. Those factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
  • Identify three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working
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Great Falls contractor employee charged with wire fraud

Traci Rosenbaum, Great Falls Tribune
Published 11:28 a.m. MT Sept. 30, 2020

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Federal authorities have charged a Great Falls woman with 10 counts of wire fraud after she allegedly altered invoices for a local construction company to the tune of $565,000.

According to the U.S. District Court indictment, Lynn Bapp Tempel managed the finances at William Tempel Construction, receiving subcontractor and supplier invoices submitted to the business for construction projects.

In 2013, William Tempel Construction entered into a contract with a woman to build a $4.4 million residence in Great Falls. Subcontractors supplying materials, equipment and labor submitted invoices directly to the company.

Over the course of three years, Tempel allegedly did not provide the homeowner with the original invoices from the subcontractors. Instead, she’s accused of providing approximately 153 William Tempel Construction invoices that falsified, altered or inflated the originals.

Her actions allegedly resulted in William Tempel Construction receiving more than $565,000 to which it was not entitled.

During the same timeframe, Tempel reportedly withdrew approximately $566,000 in cash from the company’s business account.

Hearing dates for the case are not yet available.

Criminal justice reporter Traci Rosenbaum reports on law enforcement issues for the Tribune. Reach her at [email protected] or 406-791-1490.

Follow her on Twitter @GFTrib_TRosenba.

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Read or Share this story: https://www.greatfallstribune.com/story/news/2020/09/30/great-falls-contractor-employee-charged-wire-fraud/5869715002/

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