legality of a labor issue?

Question

My fiance works for a company that only hires employees as contractors. As of this week they have started fining any one who doesn't show up for work $100 per day, or $20 per missed job on the route they would have gotten had they shown up, which ever is more. Is this legal? We live ohio, since labor laws may differ from state to state. Thanks if you can help.

Answer 1

This is illegal to the point of being hilarious. If your fiance is truly an independent contractor (IC), he has a contract to provide services to the company. Does that contract specify any sort of penalty for non-performance? If not - the company is out of bounds to attempt to assess one.

Since the company appears to be attempting to institute disciplinary action against an IC, that makes them a co-employer. Your fiance could theoretically sue under the basis that he is actually a bona-fide employee of the company and thus is entitled to all of the beneifts of an employee - group health coverage, profit-sharing, regular pay increases, and so on.

How are the fines being assessed? Are ICs supposed to write a check to reimburse the company (see paragraphs #1, above), or is it being withheld from their check? Without a specific written agreement, docking a billing invoice (for an IC) or a paycheck (for an employee) is generally not legal. BTW, if he is being paid as an employee (payroll taxes deducted, receiving a W2 rather than a 1099 at year-end etc.), he really is not an IC - if the company is just calling him an IC in order to avoid paying benefits, etc., that's also illegal.

Pretty much this is a black hole of illegal activity.....you can report these folks to the dept of labor at www.dol.gov, where you can also find more info about wage and hour law. The IRS are the folks who govern ICs - look on www.irs.gov under the "20-factor test" for ICs to see if your fiance meets the requirements. Also if the company for which he contracts is public, they should have a "hotline" to report corporate malfeasance and financial wrongdoing (required for most public companies under the Sarbanes-Oxley Act.)

Thanks for this amazing example of corporate stupidity....I'm truly in awe....

Answer 2

There are a lot of companies that abuse that contractor portion of the tax code. I heard one estimate that almost all companies who hire contractors are not really hiring contractors. First of all, what does the contract say? What no contract? Well, that may mean your fiance is actually an employee and the employer is breaking the law. Do some research on this. Here is the IRS link that discusses this.

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

What can you do? Basically report the employer to the IRS because the employer would be doing this to avoid paying taxes. They can get in trouble for that. Also, remember, that your fiance is still required to pay taxes. Some people mistakenly believe that if they are contract employees they are not supposed to pay taxes, but they are.

Answer 3

Yes, it's legal. They are contractors, not employees. Your fiance also has the right to not take the job and seek jobs elsewhere . However.....

Think of it this way

Anywhere else if you don't show up for work...you are fired. Do you think they are still going to pay you? Nope.

$20 per missed job....how is that any different than not paying an hourly employee for every hour he misses, if he shows up late? Do you really think the company should be paying for work they are not getting?

Your finance, if he wants to get paid, needs to show up on time, and do the work that's asked...and he won't have to worry about it.

Answer 4

Though I have not taken the time to research this, I work for a Worker's Compensation law firm and I do believe that it is legal, though it is mean. I believe companies do have the right to take money out of your paycheck or whatnot if you have done something that would require such action. In this case, since they do contracting style employment, that might be the only way they can really discipline.

If possible, I'd ask to see the bylaws of the company (that is if there is an actual corporation or partnership), or maybe the articles of incorporation if they are a corporation. In those documents, you'd find what is authorized and what is not.

If you are worried that it really is illegal, I'd send a letter to your state Department of Labor & Industries

Answer 5

It is legal. They're contractors, not employees, who work on a per-job basis. The company is forcing them to share in the financial loss when they don't show up. I guess this company has had some very irresponsible people.

Answer 6

Since he is an independent contractor, with no guarantee for future work, I don't see how they can really fine him for not showing up.

All they can really do is negotiate a lower rate on future jobs based on his previous job performance (which would not be good if he wasn't showing up for work). They can't go back and deduct the fine from a previous job as they can't go back and renegotiate his pay after he's taken and done the job.

But, to penalize him or require him to pay fines when he isn't obligated to work for them in the future and they aren't obligated to hire him in the future - I just don't see how they can enforce it.

If he's signed a contract stating that he is agreeing to a fine for not showing up, then he can be held accountable for reimbursing them for those fines, even if he never goes back to work for them. If they just changed the rules on a whim, good luck in trying to collect it. Like I said, all they can really do is just not pay him as much for future jobs or just not hire him anymore.

Legally they can say they are going to do it, but there really is no way they can enforce it and collect it unless they've signed a contract with each person and have that in the contract. And, chances are, he hasn't signed a contract, which throws another spin on things and makes you wonder if he really is an independent contractor or an employee that they are trying to screw over in order to avoid paying workman's comp, taxes, and SSI on. ($20/hour as a 1099 independent contractor is NOT the same income as $20/hour as a W-2 employee because as an independent contractor you have to pay self-employment tax. For W-2 employees, the employer pays half or your social security taxes and you only pay half. For 1099 employees, the employee has to pay the full amount for SS tax.)

Most likely they are blowing smoke anyway. I am supposed to fine my employees for certain things (they are kind of independent contractors - they work under a W-2, but are hired on a job by job basis), but we never do simply because we know they are under no obligation to work for us in the future. And, we can't renegotiate their rates on jobs they are already committed to.