When I hire new employees, my small business clients often ask me to design the contract between the company and the new hires. It was often only then that the company checked whether the new tenant was an independent contractor or collaborator. An agreement that is used for an employee differs, in many respects, from an agreement developed for use with an independent contractor. In this context, a summary of the main differences between a staff member and an independent contractor is summarized below. When deciding whether a company should pay an unemployment tax, as required by Maryland law, it is necessary to determine whether the worker is a self-employed contractor or a worker. Maryland Code Annotated, Labor and Employment, Section 8-205 outlines the circumstances in which a person is considered an independent contractor and is therefore not covered by unemployment taxes. To be declared an independent contractor, the individual (1) must be exempt from the control and instruction of his work, both in fact and under the contract between the employer and the contractor; (2) as a general rule, the business must be independent; and (3) the work must be outside the usual activity of the person for whom the work is being done. MD Code, Labour and Employment, Section 8-205. Code of Maryland Regulations (“COMAR”) 09.32.01.18 contains a list of factors to determine whether a worker meets these requirements. With respect to federal tax debt, a business may have a safe haven under federal law, but the best way to determine this is to file an SS-8 form with the IRS. After filing an SS-8 form, the IRS decides whether workers in a company should be treated as workers and must therefore pay taxes or be treated as independent contractors. Options for Senior America Corp.
v. U.S., 11 F. Supp.2d 666 (D. Md. 1998), found that the use of a survey by a housing services agency to establish that the treatment of unqualified home helpers for the elderly as independent contractors was an industry practice and that the Agency was therefore permitted to rely on the safe haven provision of the Internal Income Code. , are therefore not responsible for paying taxes on labour. The Tribunal found that the only question asked was whether or not the Agency relied reasonably on its survey information. The employer conducted a survey of the D.C, Baltimore, Maryland and Richmond, Virginia metropolitan areas. The results at all sites were similar, and found that about 80% of employers classified these aid organizations as independent contractors.
In reviewing the investigation, the Tribunal found that, from a legal perspective, this percentage is an “important segment” of the sector, in accordance with the requirement of letter 530 a (2) (C) ) that a significant proportion of the population follow an industry practice to demonstrate that the Agency has an appropriate basis for not treating its employees as workers. As a result, the Agency was not responsible for employment taxes. Whether an individual worker is an independent contractor or an employee has an impact on the legal consequences of the company that uses that person`s services. Proper categorization of a worker as a contractor or self-employed is essential for the satisfaction of certain regulatory debts, including proper withholding and tax transfer. Similarly, it is important to properly document an independent counterparty relationship in order to define limitations on liability and ownership of labour products, particularly intellectual property. Often, the characterization of the relationship between a workforce and a company is easy to determine. However, the line between the salaried worker and the self-employed contractor is sometimes blurred. In such a situation, the above factors must be carefully analyzed so that a well-written agreement can, at the outset, accurately identify the relationships of the parties and be executed by the parties.