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How to talk to a company as a prospective contractor vs. employee?

1099 contract when I was told I'd be w2, how do I navigate this?

  • On Tuesday I drove across country to start a new role in the Bay Area. Prior to this I was working on a year-long contract which wasn't renewed. During the interview process I was looking for a full time role, but was convinced that this was a good opportunity, particularly to get my foot in the door back in the Bay Area where I'm originally from and still have family. During the interview I was asked specifically what type of contracting I would be open to and said that I was only interested in W2ing to a new role rather than becoming an independent contractor and billing, and I stated that I wasn't interested in 1099ing. The rate I provided reflected this as well. Turns out I've been onboarded as a 1099 and the rate that I was looking for as a W2. Upon further reflection, the company is interesting and while I'm not thrilled to be a 1099 contractor, I could at least consider it for the next half a year or so, perhaps longer, depending on how things go. I was and still am very excited to be back in the bay area and while I'm crashing on my dad's couch currently, have plans to have my girlfriend fly out soon and start apartment hunting as well. However I've never been a independent contract before and had no intention of starting. I did make this clear in the interview when asked, or at least I thought I did, but now having met my boss he's certainly the type of person who a) is a bit scatterbrained and I wouldn't be surprised if that fact wasn't retained and b) was a 1099 employee himself for many years and certainly doesn't seem opposed to that approach to employment and even wasn't sure that he had ever paid payroll taxes as a contractor. A big concern is that I'm now losing an extra part of my pay check to payroll taxes and income taxes as well. My current rate is $50 an hour, which was what I was making before, but as a W2 employee through a contracting company. Now that I'm 1099 employee I'm making about 15k less than I thought I was which given my understanding of the Bay Area rental market isn't exactly thrilling. I was noticeably a bit perturbed when this came to light and my new boss asked me if that was ok. I said that this was a fair bit of new information and I'd have to get back to him. My thought it to go in tomorrow, talk about getting on a W2 contracting agreement or that I'd have to raise my rate. This is only my third job since college though and I'm a bit nervous on how to approach this, if I should even try (and instead try and take the best of a bad situation and start looking again instead now that I'm actually in the area) and the language that's best used to approach this. This was a very quick transition as well, I received the offer last Monday and was driving out that Friday to arrive this Monday, so given the very quick timeschedule and all the rest of the tight logistics I figured that the rest of the paperwork would have taken place on my first day. It didn't, but took some time to set up (through oDesk, which I had thought was going to be the company I was contracting through but turns out to be a way for freelancers to log their hours and get paid). This is all made confusing to me as I was provided with a laptop, a company phone and a number of other services through this new company, facts which I thought indicated that at the very least I was somebody's employee. Long story short, I'm less than thrilled, certainly it makes the offer to speak with my former boss who's now out here a fair bit more enticing. New info too, in briefly discussing this with my father he said that he's been self employed most of his life and that 1099's actually pay less taxes like FICA and social security so I'm really not certain what's what right now. I had thought that 1099 was more expensive that way but maybe I'm wrong? Clearly I'm unprepared for this and that adds to my sense of unease.

  • Answer:

    You've just been given a massive pay cut and possibly a benefits cut. Your new company misled you, either through malice or incompetence. They may be violating labor laws by bringing you on with a 1099 for a role that should be filled by someone on a W2. I'd call that unacceptable. You might consider going on a 1099 if they make you whole financially but you should really push to be on a W2. Do you have a written offer letter from them or an e-mail trail? Either of those would be very helpful in arguing your case. This really is a bait and switch. There's no way your new boss could claim that this is no big deal.

anonymous at Ask.Metafilter.Com Visit the source

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Employers do not have unfettered discretion in classifying their workers as employees or contractors. Indeed, regulators--both state and federal--take a very, very dim view of employers attempting to save money by classifying people who really are employees as independent contractors. Do you have to report to work at a certain time? Do you work mostly on-site? Does your employer provide all the equipment you need? If the answers to all of those questions--or even two of them--is "Yes," then you are almost certainly an employee regardless of what your employer says about it. I'd contact your http://www.dir.ca.gov/dlse/DistrictOffices.htm and report this. If you get fired or any adverse action is taken against you as a result, your employer will have just bought itself a very expensive employment lawsuit, i.e., you'll be lawyering up and suing their ass into next Tuesday, assuming the California DOL doesn't beat you to the punch.

valkyryn

The big difference is that you will have to pay the employers portion (6.2%) of the social security tax (12.4%) and you will have to make withholding tax payments which is a bit of administration, but not a showstopper. That's the first difference. Other differences includeNo paid vacationNo sick time or personal daysNo access to employer health insuranceNo access to employer 401K, HRA, or other employment-based benefitsNo access to unemployment insurance if you are laid off. (You couldn't have been laid off because you were working for yourself, remember?)This is a bum deal all around.

alms

You might take a look at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=lab&group=00001-01000&file=970-977. Prohibits an employer from engaging an individual to move for a job with false representations.

ClaudiaCenter

These people lied to you. See if you can get them to resolve the problem. Whether or not they do find a new job as soon as possible and get out of there.

rdr

Calling yourself a "W2 contractor" without having gone through an agency to set up the deal might have been the point of confusion. They probably just heard "contractor" and set you up that way. I don't think it's standard practice for a company to hire someone as a W2 contractor and then go find an agency to run it through. Usually the agency brings you in.

bleep

in terms of designation they do provide me with my equipment however way it works is that I don't theoretically have to be in the office or work set hours throughs since my job does involve communication with people I am certainly constrained by that fact but that's not that important Yes, it is. A lot of professional employees don't necessarily have set work hours either, but they are still generally expected to be there most of the time during business hours and do most of their work on-site. The fact that you have a contract is irrelevant. Both employees and contractors can have contracts. All union employees do, for example. It also doesn't matter how the contract classifies you. Lots of employers gin up contracts that basically say "You're a contractor for the purpose of pay but an employee for all other purposes." That's illegal. All that matters is what the contract says about your duties. If they make you look like an employee, you should be classified as an employee, regardless of what your employer wants or the contract says. It's just not something employers and workers are allowed to decide for themselves. Also: there is no such thing as a "W2 contractor". W2s are for employees. 1099s are for independent contractors. Ne'er the twain shall meet.

valkyryn

Yeah I agree that the use of "contractor" here is confusing. You can be a W-2 Employee with a contract, a W-2 employee of company A contracted out to company B, or a 1099 contractor. These are all are very different beasts. On one horrible, desperate occasion, I was a 1099 "contractor" that was essentially required to be in the office 9-5, M-F, on all their equipment, with a company email address and everything...but I was not an employee. I was a ghost--no vacay or benefits, not attending meetings, not technically part of the company, but still THERE, day in, day out. I do believe that company eventually ran afoul of the IRS, because now their contracting policies are very strict and to-the-letter-of-the-law. It sounds like your new bosses are taking advantage of a bit of confusion of terms, in order to have you be basically a ghost employee. Do not put yourself in this situation, if you can avoid it; if you cannot (it happens! I had no other options either), get out as soon as you can.

like_a_friend

I definitely agree with the above - I find it difficult to believe that this wasn't a deliberate deception. Do you have anything in writing confirming that you were being brought on as a W2 contractor?

ClaireBear

Do you have to report to work at a certain time? Do you work mostly on-site? Does your employer provide all the equipment you need? If the answers to all of those questions--or even two of them--is "Yes," then you are almost certainly an employee regardless of what your employer says about it.Although you are certainly right that many folks are incorrectly classified as contractors when they are in fact employees, these questions are just not that simple. It is extremely common for legitimate contractors to be required to work on site within very specific hours and to be provided equipment like a computer and phone. Determining the difference between contractors and employees is a fairly complicated question that even attorneys who specialize in the field may disagree about in specific cases. It is a very nuanced question. Admittedly many people get it wrong and end up on the wrong side of the DoL as a result, but I'm not sure that attacking the job on that basis is your most productive line of inquiry anyhow. To address the original question, I think it would be perfectly reasonable to state that you intended to take the job as a W-2 employee and that you need them to either do that or to increase your salary to make you whole. Don't do it in the form of an ultimatum, but politely and firmly state your case. You have nothing to lose by negotiating, if they refuse you can still elect to take the job as is, if you decide that is the best course of action for you. Getting into a pissing contest about the nature of the task as an employee or contractor before the job even begins is highly unlikely to be a productive way to approach your problem.

Lame_username

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