Law

The purpose of this assignment is to identify laws and federal regulations governing employment.

Consider what you have learned about employment laws and federal regulations governing employment, particularly regarding the distinctions between independent contractors and employees and how business is conducted with each. Read the scenario below.

Scenario

Madrid and Berne is a top-rated accounting firm with offices in Phoenix and Tucson. Madrid and Berne wanted to provide bookkeeping as an additional service to its clients. It hired Joan Newman Business Services, with offices in Phoenix, Flagstaff, Tucson, and Yuma, to perform contract bookkeeping services for Madrid and Berne clients who requested and needed such services. Madrid and Berne entered into an independent contractor agreement with Joan Newman Business Services. The contract stated that Joan Newman is an independent contractor and agrees that her business is an independent contractor of Madrid and Berne.

After entering into the agreement, Joan worked solely on jobs assigned by Madrid and Berne and was paid a commission for the work. The commission was based upon the fees determined by Madrid and Berne and paid by the clients to Madrid and Berne. Joan was paid on a weekly basis. She used available and unused office space at Madrid and Berne, along with Madrid and Berne’s equipment and supplies. This arrangement made it easier for clients to utilize Joan’s services and be familiar with the offices. Madrid and Berne reviewed Joan’s work and returned faulty work to her for corrections before delivering the completed work to the clients.

Assignment

In a 500-750 word paper, apply what you have learned about the distinctions between employees and independent contractors to the scenario by discussing the following.

Provide an explanation of why it is important to know the distinctions between employees and independent contractors when operating a business.
Discuss the key factors for determining Joan’s employee classification using the concepts that have been presented so far in the course and your own research relevant to the scenario.
Using the rules for distinguishing between employee and independent contractor, discuss whether Joan’s designation as an independent contractor was correct, and justify your designation by citing laws and federal regulations.
Your instructor will provide feedback on the first draft for you to review and incorporate into the Benchmark – Employee vs. Independent Contractor assignment, due in Topic 7.

Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success, Center. An abstract is not required.

This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.

You are required to submit this assignment to LopesWrite. Refer to the LopesWrite Technical Support articles for assistance.

ANSWER

Laws and Federal Regulations Governing Employment

Provide an explanation of why it is important to know the distinctions between employees and independent contractors when operating a business

When operating a business, it is important to distinguish between employees and independent contractors because it enables the business to determine whether the affected persons are covered by labor laws. While employees are covered by labor laws, independent contractors are not covered by employment and labor laws. Therefore, when operating a business, one must know when to adhere to employment and labor laws and when not to consider them.  Also, understanding the distinction between employees and independent contractors helps businesses to know what strategies they must put in place to facilitate recruitment processes. The particulars of recruitment of employees are different from those of recruiting independent contractors. There are particular bare minimums that employees must reach to be given certain jobs. Similarly, there are specific agreements that must be signed between a business and independent contractor to effect an agreement.

Businesses must know how to handle tax documents and direct employees to make correct fillings to the IRS. This is only possible if the business understands the difference between an employee and an independent contractor. While employees are required to report all money paid during a tax year, independent contractors are only required to report payments of $600 or more in a calendar year. The forms that the two sets of personnel used to present their information are also different. While employees present their earning information in W-2 forms, independent contractors are required to fill their tax information in Form 1099. Employees report for state and federal unemployment insurance while independent contractors do not. Therefore, understanding this particular requirement is essential for businesses to ensure compliance with legal requirements.

Discuss the key factors for determining Joan’s employee classification using the concepts that have been presented so far in the course and your research relevant to the scenario

Behavioral Control

The level of behavioral control that a worker is given determines whether they are independent contractors or employees. When instructions of when and where to work are given to an individual, the relationship tilts more towards an employer-employee than an independent contractor. If the worker has more freedom to choose where and when to work, then they are more likely to be independent contractors. The degree of instructions that the worker is given determines whether they are an employee or independent contractor. Employees are given detailed instructions of the job they are supposed to complete while independent contractors have more freedom as to the details of how they are supposed to complete their mandate. The system of evaluation also determines whether a worker is an employee or an independent contractor. End result evaluation points to an independent contractor relationship while detailed processes evaluation predicts employee-employer relationship. If the worker is trained more on how to carry out the work, they are likely to be an employee.

Financial Control

Independent contractors tend to have more financial control of how their businesses run. They make significant investments in the equipment needed to offer their services as opposed to employees who depend on the employer for equipment. Contractors have the opportunity for profit or loss on their side as opposed to employees who are not liable for any losses incurred in the business. Therefore, businesses might prefer independent contractors because they do not have to suffer the liabilities of such companies. If a worker is free to offer their services to other companies, they are more likely to be independent contractors as opposed to those that are attached to one company only.

Relationship

An employee and independent contractor must sign contracts that act as marching orders for their engagement. Such contracts can define the type of relationship whether employee-employer or independent contractor. the level of permanence of the engagement determines whether it belongs to an independent contractor or employee. Independent contractors tend to have more temporary engagements.

Using the rules for distinguishing between an employee and an independent contractor, discuss whether Joan’s designation as an independent contractor was correct, and justify your designation by citing laws and federal regulations

Joan’s designation as an independent contractor was not correct because Madrid and Berne had too much control of how she conducted her duties. Legally an employee faces more control from the employer to the tunes that Joan experiences. Joan worked solely on jobs assigned by Madrid and Berne and was paid a commission for the work. A contractor has the freedom to engage with other companies rather than getting tied to one company alone. When one gets tied to one company alone, they are more of an employee than an independent contractor. The commission that Joan was pad was determined by Madrid, giving the company control over the compensation that Joan had for work done.

Joan used Madrid and Berne’s office space, equipment, and supplies. Only employees have this degree of access to the employer’s resources. Independent contractors often have nothing to do with the resources of the employer. They have full control of their resources such as supplies and office space. Joan was allowed to use the resources of Madrid and Berne extensively casting doubts of whether she was an independent contractor. Madrid and Berne reviewed Joan’s work and returned faulty work for correction. This level of control only happens in employer-employee relationships. By controlling how Joan does her work and referring corrections to her, Madrid and Berne are exerting the control that only an employer often has in their employee.