A common mistake is to give sales reps business cards that show they are regular employees. Each business card must clearly indicate that the seller is an “independent” seller or broker. In no way, the word “agent” or an indication that the person is an officer (“Vice President”, “Sales Manager”, etc.), at Steffans Legal, we have extensive experience in determining whether or not an individual is an independent contractor under Massachusetts law. We have represented people from Berkshire County, Middlesex County, Worcester County, Bristol County and Barnstable County on this subject. And we`ve represented businesses in Berkshire County and Hampden County on this topic. Whether you`re an independent contractor who wants to learn more about how this opinion affects your relationship with your employer, or an employer who wants to determine the level of risk you have in terms of treating individuals, don`t hesitate to give us a call. One way to get maximum results from your field service is to hire them as independent contractors. The independent sales representatives of 1099 earn their income only through commissions. For some small businesses, this can mean the difference between surviving and closing the business. Workers who only receive commissions are called 1099ers based on the Internal Revenue Service form you send at the end of the year. Instead of the W-2 you send to hourly and salaried employees, independent contractors receive Form 1099-MISC. When ESD audits a company, an important part of the audit often focuses on whether workers have been properly classified as independent contractors.
ESD generally first conducts its common law analysis when determining whether an employee is an employee or an independent contractor. While the most important factor that EDD takes into account in determining whether to provide services to others as an employee is the right of the contracting entity to control how and how a desired result is achieved, if it cannot be decisively determined whether the contracting entity has such a right of control, EDD takes into account ten (10) factors: which it considers to be “proof of the right of control”. 1 The contractor or seller may reject an order. This distinguishes them from employees who risk being fired if they say no to the boss! In contrast, an independent contractor is considered to be a person who does business for himself. Without specific evidence of authority, the independent contractor is generally not permitted to bind the party with whom it cooperates to any form of agreement or to appear on behalf of that party. In addition, payments to an independent contractor are generally subject to a “1099” and not a withholding tax. Insurance agents were classified by a federal court in 2019 as independent contractors for pension benefit purposes. The Court considered the specific situation in relation to the common law standard in making this decision. Other types of insurance agents may be classified differently. A 1099 distribution agreement is one of the best ways to prove that the employee is an independent contractor.
Your contract must state that the employee is an independent contractor and include a description of what the agent does, how much and how often you pay, a description of how they earn their commission, e.B 10% of each sale, and a statement that the sales representative pays for their expenses, and what, if applicable, refund. There are many different considerations when deciding whether to work with independent contractors or employees. In one case where sellers were paid on commission but could draw lots against the next week`s commission, a court found that paying a commission indicated the status of an independent contractor, but allowing someone to draw lots was more indicative of their status as an employee. An employer does not deduct these taxes from payments made to an independent contractor or seller. The individual entrepreneur is responsible for paying his own taxes. Employees and independent contractors may receive commissions in addition to or in lieu of salary or contractual payments. We see many companies treating individuals as independent entrepreneurs. We get a lot of calls from people who think they are misclassified this way. Many employers have asked us to analyze whether their independent contractors should be classified as employees.
We often see it, on both sides, with the sellers. Fortunately, a recent Massachusetts court in Valle v. Powertech Industrial provided useful advice on when sales representatives are employees and when they are independent contractors. Unfortunately, there are few general legal issues that are more complicated than determining whether an employee is an employee/agent or an independent contractor. Many of the practices commonly practiced by leasing companies and brokers could be used by an applicant or tax authority to claim that an external “independent” broker is in fact an employee. Pursuant to Section 621(c)(1)(B) of the California Unemployment Insurance Code, a seller who, on a full-time basis on behalf of its principal, solicits orders from retailers for goods to be resold or delivered for use in the retailer`s business operations is an employee of the principal and not an independent contractor. For example, a person whose services consist solely of visiting retail stores and receiving orders for products sold in those retail stores on behalf of a single manufacturer would be classified as an employee under the law. The Court provided a useful summary of other cases in this area and explained how these cases differed from those of Valle. First, in Sebago v. Bos. Taxi.
Dispatch, taxi drivers were considered independent contractors because the companies operated in the sector of medallion rental and radio distribution: not in the taxi ride. Second, in Ruggiero v. Am. United Life Ins. Insurance agents who sold insurance and annuities were considered independent contractors because the agencies did not sell insurance products directly: they were there to determine which products should be supplied, structure and design the policies, and received regulatory approval. Since sellers often have deals where they receive advances or “claim” future commissions, this can get a bit confusing. If the sales representative controls how and when he sees potential customers, pays all his own expenses without refund, and your contract with them determines that he is an independent contractor, he is a legal contractor and is responsible for paying his own taxes from 1099 commission income. Some sellers prefer the flexibility that contract work allows. Instead of beating a clock, they can make their plans whenever they want: even in the middle of the night! Independent contractors usually work remotely and can rarely, if ever, meet you in person. .