They're unambiguously employees - classifying them as independent contractors is illegal, and both the IRS and their state's labor board will take violent exception to it.

This isn't the only problem: the post would make a great issue spotter for an employment law class.

I haven't read every comment he's made yet, but skimmed many of them...

Why can't they be contractors? He said they're providing their own transportation and supplies. So he's just handing them clients and appointments, and a checklist of cleaning tasks to complete and a few limitations on the supplies used. Isn't that analogous to handing a contracted software developer a requirements document and a deadline?

You'd have to squint an awful lot for the evaluation to fall out that way. I'm a contracted software dev. I'm going to run down a list of questions from the IRS. Mentally score which ones sound like a cleaning laborer.

I have business cards, a personal website, and a professional reputation. My clients ask for me by name.

I do not submit applications. I do not respond to advertisements of employment.

I often have discretion to have work performed by subordinates selected and instructed by me, not my client.

I receive negligible training from customers.

My work is often evaluated by myself or not evaluated, because I am more competent as to the details than my clients are, this being why they hired me to do it. If there is a checklist, I wrote or had substantial input on the checklist.

I work at hours I pick or by mutual agreement. I routinely do not tell clients when I start or stop working.

If a problem arises with my work, I will ordinarily be the first person told about it.

The services I provide for my clients are largely not their main line of business. They do not invoice customers for my work directly. They generally have no employees who do substantially what I do, this being a major reason why they would hire me.

There is a written contract in place between me and each of my clients, often with contentious custom language in it.

I routinely incur expenses in the course of my business which are not reimbursed by clients.

I'd say the distuingishing factor is that you have multiple clients. A maid, who is only working for one "agency", looks fishy.

At least, that is the main argument here in Germany.

The Canadian appeals court has actually created precedent for an an economically 'dependent contractor'. That contractors may run their own business and meet many of the independence criteria, but still be working for a single firm or contract.

Summary of the case at: http://www.djmlaw.ca/downloads/Snapshot_April_2010.pdf

Fun fact: if you go out of your way to staff "new" contractors with experienced "old" contractors, that can be considered "training".

How does Mc Donalds and others run their franchisee and get away with these ? Franchisees do not have their own websites (its run by mcd). They have uniforms, clear checklists for employees of franchisees and most of the other points that is mentioned here.

Because the law for individuals and companies is different. In this case, the franchised companies are companies in their own right, and they have employees. Franchised companies usually (?) have a licensing contract with the mothership, not an ownership arrangement. MCD does not 'contract' the franchise employees - that would be trouble. In the redditor's case, that's exactly what he does, down to giving them uniforms.

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up.

Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee.

If he were a matching service, it might be easier. But, he's extending his brand/guarantee/monitoring over the service, so he may have to thread-a-needle to win any challenge that a regulator or (perhaps more likely) disgruntled contractor raises.

> the presumption by determining authorities seems to be in the 'employee' direction

Note that this is not done on a whim: these laws and interpretations were introduced because employers were systematically exploiting workers, hiring them as contractors just to work around their established rights.

And it works both ways, really: having a clearer set of rules reduces the risk for costly litigation when something happens.

> Note that this is not done on a whim: these laws and interpretations were introduced because employers were systematically exploiting workers, hiring them as contractors just to work around their established rights.

While this is the most common form of abuse, it is sometimes also used as a means of tax evasion by the employer, employee, or both.

This is interesting and surprising to me. I wonder how, for example, Comcast manages this.

Comcast has a huge independent contractor network that they use to subsidize their full-time on-site tech support. All of those contractors wear Comcast shirts, have Comcast written on their trucks, must meet customers at the times that Comcast schedules, and do receive at least a portion of their supplies from Comcast.

They're currently being sued for this.

Are you sure that they individual support people are self-employed? If they merely work for a contractor company, that would be okay (assuming they're employees of the contractor). Otherwise, it sounds odd.

I am not sure, but that would make sense.

I imagine initially both sides would be happy to treat the relationship as contractual. It's a great way to start when you are not sure of demand, and the cleaners you employ have other clients anyway (I'd say that makes them definitely not employees unless and until this is their main income). The ones who have now quit other jobs to work with him are of course de-facto employees, and he'll have to treat them as such long-term.

However He sounds like he would be happy to treat them as employees long-term anyway (if they agree to it of course), but then that's a good problem to have, and really starting with employees from day 1 would have made this far harder to get off the ground, so he's gone about it the right way, he just has a steep learning curve ahead.

Both sides are probably happy because the cleaning workers probably aren't paying taxes at all.

If they were, they would be extremely unhappy with this arrangement, because 1099 employees pay both halves of FICA ("self-employment tax").

One possible way this pans out: eventually, he ends up with a worker who gets a notice of imputed liability from the IRS; that notice threatens to put the worker into bankruptcy, and so he calls an IRS help-line or his state labor board or an attorney. The IRS reclassifies all his employees and now threatens him with bankruptcy.

I don't know about the US, but over here if you have to follow orders, work under constant supervision or on the clock, you can't be classified as a contractor anymore (in theory).

I understand that, but the maids are not working under constant supervision or on the clock.

They are working under the company's schedule, work guidelines and command. It's very subjective (for a layman), hopefully someone more versed in the area will clear this up.

A detailed checklist that the cleaners have to meet sounds like supervision to me.

Let's say they're getting $20/hr. Can they themselves hire someone else at $15/hr to deliver the service (or "assist them") and pocket the difference? No? Then they're probably an employee. Contractors are supposed to have profit/loss exposure.

An easy litmus test:

Would it be OK for the cleaner to subcontract the work?

If so, it could be legit. If not, they're employees. From the original thread, I don't get the impression he'd be OK with subcontracting, so he is probably non-compliant.

That said, I don't think its a huge deal. He'll get audited, he'll pay the owed taxes and penalties and move on with his life. I've been audited by the ESC, its really not that big of a deal.

He's also learned that his customers will pay a premium for good service, so if he has to raise the price, big deal. He'll be fine.

I'm not sure about America, but in most countries I'm familiar with, it is ultimately the decision of the tax authorities whether people who work for a company are employees or contractors. There's generally a well-specified test for this.

Certainly, in this country, the maids would be unambiguously employees.

The US regulations are terribly vague, depend heavily on facts-on-the-ground, and can turn on minutiea like who gets cake on their birthday (so not making that up). That said, even for a law which has more edge cases than a course on graph theory, this case is not a close call.

It largely comes down to whether or not you direct and control the manner with which these maids work, which he certainly does. He has his maids wear branded uniforms, gives them a set checklist to follow, and has them bring a bottle of wine to each first-time customer. The fact that his maids have their own clients and use their own cleaning supplies does work in his favor, but overall he's still on the wrong side of the divide.

I'm not an employment lawyer, but I have been through a state employment classification audit, and I am pretty confident his maids would be reclassified if he came under scrutiny.

The IRS has a 20 point "Independent Contractor vs Employee" checklist, and he falls on the wrong side of a number of these items: http://www.webster.edu/about/policy/independent_contractor_c...

I've been aware for a long time about the distinction between employees and contractors, and the basic idea is clear enough to me. However, the difference between contractors and vendors still baffles me.

I don't issue a 1099 to Staples for delivering office supplies (though I realize we dodged that bullet by a hair a couple years ago). However, I do issue one to a guy I find on CraigsList to redesign my web site. In that case the difference seems obvious. But where is the line?

Generally if a payment is made to a corporation or total payments are less than $600 for the year you don't have to issue a 1099.

http://www.irs.gov/pub/irs-pdf/i1099msc.pdf