Focus on Misclassification: Are Your Nonprofit s Workers Employees or Independent Contractors?

Transcription

1 Focus on Misclassification: Are Your Nonprofit s Workers Employees or Independent Contractors? Jeff Tenenbaum David Warner Brian Hudson MAY 18, :30-2:00 PM ET Venable LLP Washington, DC

2 agenda What s in a Name: Employee vs. Independent Contractor Federal rule Varying state law interpretations Avenues of Enforcement Government Employees and the plaintiffs bar Consequences of Misclassification Identifying and Remediating Problems 1 employee vs. independent contractor Varying definitions between common, federal and state law Executive assistant vs. lawn-care company Common theme control Behavioral Financial 2

3 IRS: old 20-factor test (1) instructions (2) training (3) integration into the business (4) services rendered personally (5) hiring, supervising, and paying assistants, (6) continuing relationship (7) set hours of work (8) full-time required (9) doing work on employer s premises (10) order or sequence set (11) oral or written reports (12) payment by hour, week or month (13) payment of business or travel expenses (14) furnishing significant tools and materials (15) significant investment (16) realization of profit or loss (17) working for more than one entity (18) making services available to general public (19) right to discharge (20) right to terminate 3 common law or economic realities test Behavioral control Instructions how, when, or where to do the work? what tools or equipment? what personnel to use? Training particularly procedures and methods 4

4 Financial control common law or economic realities test Compensation Per hour/day/week/month? Project basis? Expenses reimbursed? Investment and opportunity for profit or loss? 5 common law or economic realities test Relationship of the Parties Provision of benefits Exclusivity of arrangement Permanence of relationship Written agreements 6

5 the economic realities test Degree of control exercised over the worker Worker s opportunities for profit and loss Worker s investment in equipment or material, or employment of other workers Skill required for the work Permanence of the working relationship Whether the worker s services are an integral part of the business 7 varying state tests can apply States are not restricted by IRS definition In Maryland employment status is presumed Criteria for determining independent contractor status Person is free from the employing unit s control or direction Service being provided is outside the usual course of business of the employer Contractor is customarily engaged in an independently established business 8

6 avenues of enforcement Current focus of government authorities Employees Plaintiff s bar 9 priority of federal government DOL Historic priority of Patty Smith, Solicitor of Labor $46 million in proposed 2012 DOL budget specific to worker misclassification; $15 million budgeted for Wage-Hour investigations (90 new investigators) IRS Employment National Tax Research Program a three-year IRS audit initiative of 6,000 randomly targeted audits In addition to worker classification, invasive audits look at fringe benefits, expense reimbursement, executive compensation and other withholding issues 10

7 state enforcement Maryland, Connecticut, New York, Pennsylvania are just some of the states enacting or considering laws to crack down on worker misclassification 37 states have entered into agreements with DOL and IRS to share information related to worker misclassification Tax auditors for each side bundle information and share it with their counterparts 11 employees SS-8 Determination Many IRS audits are initiated as a result of claims filed by workers for benefits, or are related to workers personal tax issues An SS-8 Determination is made by an IRS agent and although not binding on a company may lead to an IRS examination Significant questions regarding what effect an adverse SS-8 determination will have on the employer in a subsequent audit 12

8 SS-8 criteria General Information Behavioral Control Financial Control Relationship of the Worker and Firm 13 so is worker x an employee or an independent contractor? Wrong answer may result in significant liabilities - back taxes; backpay and overtime payments; related liability under a number of laws and regulations. Answer implicates several areas of law Federal and state wage-hour law, federal and state tax law, benefits, and related laws and regulations 14

9 Consequences of Misclassification Overtime and backpay under the FLSA; damages Potential for class actions Coverage under Title VII and other EEO laws Benefit eligibility Back taxes: Social Security Medicare Unemployment Insurance Trust Smaller employers and coverage under additional laws due to sudden increase in workforce 15 potential for relief under IRC section 530 Section 530 of the Revenue Act of 1978 Permits businesses to treat workers as independent contractors, avoiding the more detailed factors of the 20-point test, as long as the following requirements are met: Reasonable basis Substantive consistency Reporting consistency 16

10 requirements of section 530 Reasonable basis court case, IRS ruling or past audit advice of counsel or accountant Industry practice Substantive consistency similarly situated workers treated as independent contractors Reporting consistency employer has only filed 1099s with respect to the workers in question for all years 17 section 530 under fire Federal legislation has been introduced in various forms to weaken Section 530 relief FY 2011 budget called for prospective elimination of Section 530 Other Federal legislation proposed in the last Congress would require independent contractors to be provided specific notice of their status and impose penalties 18

11 identifying and remediating problems Self-audit Independent Contractor Agreements 19 common problems Retirees performing their old duties Former employees who return to work as independent contractors Current employees working in a second capacity Independent contractors in a management or supervisory role 20

12 cleaning-up No obligation to self-report Modify arrangements at year-end to avoid W-2 and 1099 reports If possible, modify position to provide context for change in arrangement temp to perm benefit eligibility additional duties 21 independent contractor agreements In a perfect world, written contract addressing each of the following: Independent, discrete tasks or project Limited training or instruction required Worker decides when, where, how the work is to be performed Worker provides his/her own tools, equipment, assistants Worker has freedom to contract with others for his services Worker works off-site Compensation should not resemble a salary Termination only for non-performance/breach of contract 22

13 independent contractor agreements In real world, written contract addressing each of the following: Define scope of work in contract Limit training or instruction Worker decides how the work is to be performed If worker does not have freedom to contract with others for services, limit duration of contract Require invoicing and, if practicable, fixed-fee type payments Limited termination rights Avoid circumstances where IC position is identical to W-2 employees 23 hypos 24

14 questions? 25 contact information YOUR VENABLE TEAM Brian M. Hudson t Jeffrey S. Tenenbaum t David R. Warner t

15 Speaker Biographies our people

16 our people Jeffrey S. Tenenbaum Partner Washington, DC Office T F jstenenbaum@venable.com AREAS OF PRACTICE Tax and Wealth Planning Antitrust Political Law Business Transactions Tax Tax Controversies Tax Policy Tax-Exempt Organizations Wealth Planning Regulatory INDUSTRIES Nonprofit Organizations and Associations Credit Counseling and Debt Services Financial Services Consumer Financial Protection Bureau Task Force GOVERNMENT EXPERIENCE Legislative Assistant, United States House of Representatives BAR ADMISSIONS District of Columbia Jeffrey Tenenbaum chairs Venable's Nonprofit Organizations Practice Group, as well as its Credit Counseling and Debt Services Industry Practice Group. He is one of the nation's leading nonprofit attorneys, and also is an accomplished author, lecturer and commentator on nonprofit legal matters. Based in the firm's Washington, D.C. office, Mr. Tenenbaum counsels his clients on the broad array of legal issues affecting trade and professional associations, charities, foundations, advocacy groups, and other nonprofit organizations, and regularly represents clients before Congress, federal and state regulatory agencies, and in connection with governmental investigations, enforcement actions, litigation, and in dealing with the media. Mr. Tenenbaum was the 2006 recipient of the American Bar Association's Outstanding Nonprofit Lawyer of the Year Award, the inaugural (2004) recipient of the Washington Business Journal's Top Washington Lawyers Award, the 2004 recipient of The Center for Association Leadership's Chairman's Award, and the 1997 recipient of the Greater Washington Society of Association Executives' Chairman's Award. He also was a Fellow of the Bar Association of the District of Columbia and is AV Peer-Review Rated by Martindale-Hubbell. He started his career in the nonprofit community by serving as Legal Section manager at the American Society of Association Executives, following several years working on Capitol Hill. REPRESENTATIVE CLIENTS American Academy of Physician Assistants American Association of Homes and Services for the Aging American Association of Museums American College of Radiology American Forests American Institute of Architects Air Conditioning Contractors of America American Society for Microbiology American Society for Training and Development American Society of Anesthesiologists American Society of Association Executives American Society of Civil Engineers American Society of Clinical Oncology American Staffing Association Association for Healthcare Philanthropy Association of Corporate Counsel Association of Private Sector Colleges and Universities Automotive Aftermarket Industry Association The College Board Council on Foundations Foundation for the Malcolm Baldrige National Quality Award Homeownership Preservation Foundation

17 EDUCATION J.D., Catholic University of America, Columbus School of Law, 1996 B.A., Political Science, University of Pennsylvania, 1990 MEMBERSHIPS American Society of Association Executives California Society of Association Executives New York Society of Association Executives The Humane Society of the United States Independent Insurance Agents and Brokers of America Lions Club International Money Management International National Association of Chain Drug Stores National Athletic Trainers' Association National Coalition for Cancer Survivorship National Defense Industrial Association National Fallen Firefighters Foundation National Hot Rod Association National Propane Gas Association National Retail Federation National Student Clearinghouse National Telecommunications Cooperative Association The Nature Conservancy NeighborWorks America Peterson Institute for International Economics Professional Liability Underwriting Society Project Management Institute Public Health Accreditation Board Public Relations Society of America Recording Industry Association of America Romance Writers of America Texas Association of School Boards Trust for Architectural Easements Volunteers of America HONORS Fellow, Bar Association of the District of Columbia, Recipient, American Bar Association Outstanding Nonprofit Lawyer of the Year Award, 2006 Recipient, Washington Business Journal Top Washington Lawyers Award, 2004 Recipient, The Center for Association Leadership Chairman's Award, 2004 Recipient, Greater Washington Society of Association Executives Chairman's Award, 1997 Legal Section Manager / Government Affairs Issues Analyst, American Society of Association Executives, AV Peer-Review Rated by Martindale-Hubbell Listed in Who's Who in American Law and Who's Who in America, 2005-present editions ACTIVITIES Mr. Tenenbaum is an active participant in the nonprofit community who currently serves on the Editorial Advisory Board of the American Society of Association Executives' Association Law & Policy legal journal, the Advisory Panel of Wiley/Jossey- Bass Nonprofit Business Advisor newsletter, and the ASAE Public Policy Committee. He previously served as Chairman of the AL&P Editorial Advisory Board and has served on the ASAE Legal Section Council, the ASAE Association Management Company Accreditation Commission, the GWSAE Foundation Board of Trustees, the GWSAE Government and Public Affairs Advisory Council, the Federal City Club Foundation Board of Directors, and the Editorial Advisory Board of Aspen's Nonprofit Tax & Financial Strategies newsletter. PUBLICATIONS Mr. Tenenbaum is the author of the book, Association Tax Compliance Guide, published by the American Society of Association Executives, and is a contributor to numerous ASAE books, including Professional Practices in Association Management, Association Law Compendium, The Power of Partnership, Essentials of the Profession Learning System, Generating and Managing Nondues Revenue in Associations, and

18 several Information Background Kits. He also is a contributor to Exposed: A Legal Field Guide for Nonprofit Executives, published by the Nonprofit Risk Management Center. In addition, he is a frequent author for ASAE and many of the other principal nonprofit industry organizations and publications, having written more than 300 articles on nonprofit legal topics. SPEAKING ENGAGEMENTS Mr. Tenenbaum is a frequent lecturer for ASAE and many of the major nonprofit industry organizations, conducting over 30 speaking presentations each year, including many with top Internal Revenue Service, Federal Trade Commission, U.S. Department of Justice, Federal Communications Commission, and other governmental officials. He served on the faculty of the ASAE Virtual Law School, and is a regular commentator on nonprofit legal issues for The New York Times, The Washington Post, Los Angeles Times, The Washington Times, The Baltimore Sun, Washington Business Journal, Legal Times, Association Trends, CEO Update, and other periodicals. He also has been interviewed on nonprofit legal issues on Voice of America Business radio.

19 our people David R. Warner Partner Tysons Corner, VA Office T F drwarner@venable.com AREAS OF PRACTICE Labor and Employment Financial Services Wage Compliance Investment Management Regulatory INDUSTRIES Government Contractors Nonprofit Organizations and Associations BAR ADMISSIONS Virginia District of Columbia Maryland COURT ADMISSIONS U.S. District Court for the District of Maryland U.S. District Court for the District of Columbia U.S. Court of Appeals for the Fourth Circuit U.S. District Court for the Northern District of Florida EDUCATION David Warner's practice focuses on the resolution and litigation of complex labor, employment, and business disputes. He represents and counsels both private and public sector clients, with a particular emphasis on the government contractor and non-profit industries. Employment Counseling: A substantial portion of Mr. Warner's practice is devoted to counseling employers on labor and employment related matters in order to minimize potential litigation risk. In addition to day-to-day counseling on employment actions, Mr. Warner provides guidance regarding the design and implementation of effective and defensible application, hiring, promotion, and compensation practices, including conducting comprehensive audits of personnel practices to proactively identify and remediate issues that could give rise to class claims. Mr. Warner also advises companies in cross-border employment matters, including the design and implementation of expatriate employment agreements, application of U.S. laws to foreign-based employees, and related issues. Representative engagements include: Design and implementation of ex-pat employment agreements for employees located in Iraq, Afghanistan, Africa, Central and South America, and the Caribbean Investigation and resolution of harassment allegations of foreign employees in Africa Negotiation of 70% reduction of back-pay and benefits demanded by United Mine Workers of America under the federal Worker Adjustment and Retraining Notification ("WARN") Act following shutdown of mining facility Design and implementation of strategic corporate diversity initiatives for company with 100,000+ employees Design and implementation of application and selection processes for 5,000+ management positions at Fortune 100 company Training of executives and senior leadership regarding talent management best practices at Fortune 100 company Comprehensive equity analysis of management pay at Fortune 500 company, including implementation of remedial adjustments to employee compensation Employment Litigation: Mr. Warner routinely represents employers in litigation concerning alleged violations of Title VII, the ADA, ADEA, and other federal and state laws prohibiting discrimination and retaliation. Mr. Warner s litigation experience includes complex class action litigation, brought by both private claimants and government agencies, involving extensive electronic discovery and statistical analyses. Representative engagements include: Serving as lead defense counsel in nationwide promotions class action pending before the Equal Employment Opportunity Commission (EEOC) Lead defense counsel in successful opposition to class certification in five putative class actions before the EEOC

20 J.D., cum laude, Georgetown University Law Center, 1996 Editor, Articles and Notes, American Criminal Law Review B.A., cum laude, Georgetown University, 1993 MEMBERSHIPS American Bar Association Maryland Bar Association Virginia Bar Association District of Columbia Bar Association Maryland Defense Counsel, Inc. Member of defense trial team for what would have been the largest employment discrimination class action ever tried to a jury had the matter not resolved following a significant defense victory on motions in limine on the eve of trial Lead defense counsel for successful defense of several discrimination and wrongful termination claims filed in the District of Columbia against national hotel chain under private ADR agreement Business Litigation: Mr. Warner also routinely represents companies in litigation concerning the enforcement of management rights in regard to restrictive covenants, trade secrets, business conspiracy and procurement integrity laws. Representative engagements include: Representation of telecommunications contractor in prosecution of business conspiracy, copyright, breach of duty of loyalty, and trade secrets claims against former employee and competitor; matter resolved prior to trial with more than $4 million paid to client First-chair counsel for government contractor in breach of contract, Unfair Trade Practices Act, and fraud claims against prime contractor; matter resolved before filing of complaint with full recovery of more than $750,000 paid to client First-chair counsel in prosecution of breach of duty of loyalty and trade secret claims against medical supply sales representative in Maryland First-chair counsel in prosecution of breach of duty of loyalty and non-compete violation against sales representative in Maryland Government Contractor Compliance and Audits: Mr. Warner has extensive experience advising government contractors in compliance matters, audits, and litigation with the federal government. Representative engagements include: Lead attorney in negotiation of 75% reduction of multi-million dollar back pay demand (levied prior to client's engagement of Venable) on behalf of one of the fifty largest private employers in the United States; directed compliance efforts resulting in successful conclusion of multi-year conciliation agreement Lead attorney in successful resolution of defense contractor audit, which included significant issues concerning pay equity in salaried ranks Lead attorney in training of executives and senior leadership regarding affirmative action, diversity, and talent management best practices at Fortune 100 company Lead attorney in design and implementation of strategic corporate diversity initiatives for company with 100,000+ employees Represented client in successful resolution of OFCCP glass ceiling audit of multibillion dollar services company Represented client in successful resolution of glass ceiling audit of multi-billion dollar food manufacturing company Represented client in defense of claims of systemic hiring discrimination brought by OFCCP against national financial services company PUBLICATIONS May 18, 2011, Focus on Misclassification: Are Your Nonprofit s Workers 'Employees' or 'Independent Contractors?' March 29, 2011, Dangers and Opportunities: Navigating Nonprofit Partnerships, Collaborations, Joint Ventures and More December 6, 2010, Mergers, Alliances, Affiliations and Acquisitions for Nonprofit Organizations: Financial and Legal Issues June 2010, Turns Out, There s No Such Thing As Free Labor Either: Why Most Employers Should be Paying Interns or Modifying/Abandoning Their Unpaid Internship Programs, Labor & Employment News Alert May 12, 2010, Nonprofit Labor and Employment: Challenges, Solutions and Legal Pitfalls May 6, 2010, Proactive Strategies for Minimizing HR and Other Legal Risks in Mergers and Joint Ventures (handouts) May 6, 2010, Proactive Strategies for Minimizing HR and Other Legal Risks in

21 Mergers and Joint Ventures (PowerPoint presentation) April 2010, "What Are You, People? On [State-Licensed Medical Marijuana]?" The Hazy Intersection of State Medical Marijuana Laws, Federal Authorities and Employer Drug Free Workplace and Testing Policies, Labor & Employment News Alert April 19, 2010, Comments to EEOC Notice of Public Rulemaking Regarding "Reasonable Factor Other Than Age" Under the Federal Age Discrimination in Employment Act Summer 2009, "Spiraling Costs and Crashing Markets Who Will Be Left Holding the (Empty) Bag for Depleted Pensions and Unfunded Health Care Liabilities?" in Law Journal of the Energy and Mineral Law Institute, 30th volume January 4, 2010, December "Payroll Surprise" Waiting for Some Employers in 2010, Labor & Employment News Alert May 21, 2009, Nonprofits in Lean Times: Employment and Labor Challenges for Nonprofits in the Economic Downturn February 2, 2009, President Obama Issues Three Labor-Friendly Executive Orders, Labor & Employment News Alert February 2008, IP News & Comment - February 2008, IP News & Comment August 2005, Legal Trends: and Electronic Discovery -- Ignore Now, Pay Later, HR Magazine April 1, 1999, Avoiding Liability in Discipline and Termination Decisions - A Reverse Engineering Analysis SPEAKING ENGAGEMENTS Mr. Warner is a frequent lecturer on topics including compliance with the McNamara-O Hara Service Contract Act, the Davis-Bacon Act, the Family and Medical Leave Act, the Fair Labor Standards Act, reasonable accommodation under the Americans with Disabilities Act, OFCCP compliance, hiring, firing, discipline and other aspects of the employer/employee relationship touched upon by state and federal law.

22 our people Brian M. Hudson Of Counsel Washington, DC Office T F bmhudson@venable.com AREAS OF PRACTICE Labor and Employment Financial Services Wage Compliance INDUSTRIES Education BAR ADMISSIONS District of Columbia Virginia EDUCATION J.D., Georgetown University Law Center, 1999 B.A., University of North Carolina at Chapel Hill, 1993 Brian Hudson advises and defends employers in a wide variety of labor relations and employment law matters. In his practice, Mr. Hudson works closely with public and private employers to help them achieve success in union avoidance; collective bargaining; immigration law compliance; employment and separation agreement negotiations; and the development and administration of personnel policies and practices related to hiring, firing, discipline, performance review, discrimination and harassment avoidance, wages and hours of work, and leave. He frequently defends clients against charges of discrimination, wrongful discharge, harassment, retaliation, unfair labor practices, union grievances, and similar matters before federal and state courts, the National Labor Relations Board (NLRB), Equal Employment Opportunity Commission (EEOC), numerous state agencies, and arbitration proceedings. Mr. Hudson has substantial experience with public employment and labor law in the District of Columbia. ACTIVITIES A member of the ABA s Labor and Employment Section, Mr. Hudson regularly speaks and writes in various forums on diverse labor and employment law-related topics, including union organizing, the ADA, FMLA, child labor laws and sexual harassment prevention. PUBLICATIONS May 18, 2011, Focus on Misclassification: Are Your Nonprofit s Workers 'Employees' or 'Independent Contractors?' May 7, 2011, Classification of Scientific Society Workers: 'Employees' Versus 'Independent Contractors' March 2011, Focus on Misclassification Are Your Workers 'Employees' or 'Independent Contractors?', Employee Benefits and Executive Compensation Alert September 9, 2009, The E-Verify Mandate Has Arrived: It's Time For Federal Contractors To Comply, Labor & Employment News Alert July 13, 2009, Mandatory E-Verify for Federal Contractors Appears Likely; Senate Blocks DHS Plan to Rescind Contested "No-Match" Rule, Labor & Employment News Alert May 7, 2009, DHS Announces New Workforce Enforcement Strategy for Immigration January 14, 2009, Mandatory E-Verify for Federal Contractors on Hold Until February 20, 2009 Pending Court Challenge, Government Contracts Update November 19, 2008, Final E-Verify Rule Amends FAR for Federal Contractors, Labor & Employment News Alert November 20, 2007, Department of Homeland Security Issues New Form I-9, Labor &

23 Employment News Alert SPEAKING ENGAGEMENTS May 18, 2011, Focus on Misclassification: Are Your Nonprofit s Workers 'Employees' or 'Independent Contractors?' May 7, 2011, "Classification of Scientific Society Workers: 'Employees' Versus 'Independent Contractors'" for the Council of Scientific Society Presidents February 17, 2011, Focus on Misclassification: 'Employee' vs. 'Independent Contractor' March 17, 2009, Human Resource Society of Prince George's County December 16, 2008, "New and Revised Rules Under the Family and Medical Leave Act: What Employers Need to Know," presentation as part of Venable s Breakfast Briefing Big Changes Coming to Labor and Employer Law December 10, 2007, Brian Hudson Speaks on Recent Immigration Law Developments October 11, 2007, Baltimore Chapter of the Associated Builders and Contractors Meeting June 20, 2006, Practice and Pitfalls Before the D.C. Office of Employee Appeals

24 Additional Information

25 SS-8 Form (Rev. December 2009) Department of the Treasury Internal Revenue Service Name of firm (or person) for whom the worker performed services Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding Worker s name OMB No Firm s address (include street address, apt. or suite no., city, state, and ZIP code) Worker s address (include street address, apt. or suite no., city, state, and ZIP code) Trade name Daytime telephone number Worker s social security number ( ) Telephone number (include area code) ( ) Firm s employer identification number Worker s employer identification number (if any) Note. If the worker is paid by a firm other than the one listed on this form for these services, enter the name, address, and employer identification number of the payer. 1 Disclosure of Information The information provided on Form SS-8 may be disclosed to the firm, worker, or payer named above to assist the IRS in the determination process. For example, if you are a worker, we may disclose the information you provide on Form SS-8 to the firm or payer named above. The information can only be disclosed to assist with the determination process. If you provide incomplete information, we may not be able to process your request. See Privacy Act and Paperwork Reduction Act Notice on page 5 for more information. If you do not want this information disclosed to other parties, do not file Form SS-8. Parts I V. All filers of Form SS-8 must complete all questions in Parts I IV. Part V must be completed if the worker provides a service directly to customers or is a salesperson. If you cannot answer a question, enter Unknown or Does not apply. If you need more space for a question, attach another sheet with the part and question number clearly identified. Part I General Information This form is being completed by: Firm Worker; for services performed to. (beginning date) (ending date) 2 Explain your reason(s) for filing this form (for example, you received a bill from the IRS, you believe you erroneously received a Form 1099 or Form W-2, you are unable to get worker s compensation benefits, or you were audited or are being audited by the IRS) Total number of workers who performed or are performing the same or similar services. How did the worker obtain the job? Application Bid Employment Agency Other (specify) Attach copies of all supporting documentation (contracts, invoices, memos, Forms W-2 or Forms 1099-MISC issued or received, IRS closing agreements, IRS rulings, etc.). In addition, please inform us of any current or past litigation concerning the worker s status. If no income reporting forms (Form 1099-MISC or W-2) were furnished to the worker, enter the amount of income earned for the year(s) at issue $. If both Form W-2 and Form 1099-MISC were issued or received, explain why. 6 Describe the firm s business. 7 Describe the work done by the worker and provide the worker s job title. 8 Explain why you believe the worker is an employee or an independent contractor. 9 Did the worker perform services for the firm in any capacity before providing the services that are the subject of this determination request? Yes No N/A If Yes, what were the dates of the prior service? If Yes, explain the differences, if any, between the current and prior service. 10 If the work is done under a written agreement between the firm and the worker, attach a copy (preferably signed by both parties). Describe the terms and conditions of the work arrangement. For Privacy Act and Paperwork Reduction Act Notice, see page 5. Cat. No T Form SS-8 (Rev )

26 Form SS-8 (Rev ) Page 2 Part II Behavioral Control 1 What specific training and/or instruction is the worker given by the firm? 2 How does the worker receive work assignments? 3 Who determines the methods by which the assignments are performed? 4 Who is the worker required to contact if problems or complaints arise and who is responsible for their resolution? 5 What types of reports are required from the worker? Attach examples. 6 Describe the worker s daily routine such as, schedule, hours, etc. 7 At what location(s) does the worker perform services (e.g., firm s premises, own shop or office, home, customer s location, etc.)? Indicate the appropriate percentage of time the worker spends in each location, if more than one. 8 Describe any meetings the worker is required to attend and any penalties for not attending (e.g., sales meetings, monthly meetings, staff meetings, etc.). 9 Is the worker required to provide the services personally? 10 If substitutes or helpers are needed, who hires them? 11 If the worker hires the substitutes or helpers, is approval required? If Yes, by whom? 12 Who pays the substitutes or helpers? 13 Is the worker reimbursed if the worker pays the substitutes or helpers? If Yes, by whom? Yes Yes Yes No No No Part III Financial Control 1 2 List the supplies, equipment, materials, and property provided by each party: The firm The worker Other party Does the worker lease equipment? If Yes, what are the terms of the lease? (Attach a copy or explanatory statement.) Yes No 3 What expenses are incurred by the worker in the performance of services for the firm? Specify which, if any, expenses are reimbursed by: The firm Other party Type of pay the worker receives: Salary Commission Hourly Wage Piece Work Lump Sum Other (specify) If type of pay is commission, and the firm guarantees a minimum amount of pay, specify amount $. Is the worker allowed a drawing account for advances? If Yes, how often? Specify any restrictions. Yes No 7 Whom does the customer pay? Firm Worker If worker, does the worker pay the total amount to the firm? Yes No If No, explain. 8 9 Does the firm carry worker s compensation insurance on the worker? Yes No What economic loss or financial risk, if any, can the worker incur beyond the normal loss of salary (e.g., loss or damage of equipment, material, etc.)? Form SS-8 (Rev )

27 Form SS-8 (Rev ) Page 3 Part IV Relationship of the Worker and Firm 1 2 List the benefits available to the worker (e.g., paid vacations, sick pay, pensions, bonuses, paid holidays, personal days, insurance benefits). Can the relationship be terminated by either party without incurring liability or penalty? Yes If No, explain your answer. No 3 4 Did the worker perform similar services for others during the same time period? If Yes, is the worker required to get approval from the firm? Yes Yes No No Describe any agreements prohibiting competition between the worker and the firm while the worker is performing services or during any later period. Attach any available documentation. 5 6 Is the worker a member of a union? Yes No What type of advertising, if any, does the worker do (e.g., a business listing in a directory, business cards, etc.)? Provide copies, if applicable. 7 If the worker assembles or processes a product at home, who provides the materials and instructions or pattern? 8 What does the worker do with the finished product (e.g., return it to the firm, provide it to another party, or sell it)? 9 How does the firm represent the worker to its customers (e.g., employee, partner, representative, or contractor)? 10 If the worker no longer performs services for the firm, how did the relationship end (e.g., worker quit or was fired, job completed, contract ended, firm or worker went out of business)? Part V 1 For Service Providers or Salespersons. Complete this part if the worker provided a service directly to customers or is a salesperson. What are the worker s responsibilities in soliciting new customers? 2 3 Who provides the worker with leads to prospective customers? Describe any reporting requirements pertaining to the leads What terms and conditions of sale, if any, are required by the firm? Are orders submitted to and subject to approval by the firm? Who determines the worker s territory? Did the worker pay for the privilege of serving customers on the route or in the territory? If Yes, whom did the worker pay? If Yes, how much did the worker pay? $ Where does the worker sell the product (e.g., in a home, retail establishment, etc.)? Yes Yes No No 9 List the product and/or services distributed by the worker (e.g., meat, vegetables, fruit, bakery products, beverages, or laundry or dry cleaning services). If more than one type of product and/or service is distributed, specify the principal one Does the worker sell life insurance full time? Does the worker sell other types of insurance for the firm? If Yes, enter the percentage of the worker s total working time spent in selling other types of insurance Yes Yes No No % If the worker solicits orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments, enter the percentage of the worker s time spent in the solicitation % Is the merchandise purchased by the customers for resale or use in their business operations? Describe the merchandise and state whether it is equipment installed on the customers premises. Yes No Sign Here Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented are true, correct, and complete. Type or print name below signature. Title Date Form SS-8 (Rev )

28 Form SS-8 (Rev ) General Instructions Section references are to the Internal Revenue Code unless otherwise noted. Purpose Firms and workers file Form SS-8 to request a determination of the status of a worker for purposes of federal employment taxes and income tax withholding. A Form SS-8 determination may be requested only in order to resolve federal tax matters. If Form SS-8 is submitted for a tax year for which the statute of limitations on the tax return has expired, a determination letter will not be issued. The statute of limitations expires 3 years from the due date of the tax return or the date filed, whichever is later. The IRS does not issue a determination letter for proposed transactions or on hypothetical situations. We may, however, issue an information letter when it is considered appropriate. Definition Firm. For the purposes of this form, the term firm means any individual, business enterprise, organization, state, or other entity for which a worker has performed services. The firm may or may not have paid the worker directly for these services. If the firm was not responsible for payment for services, be sure to enter the name, address, and employer identification number of the payer on the CAUTION first page of Form SS-8, below the identifying information for the firm and the worker. The SS-8 Determination Process The IRS will acknowledge the receipt of your Form SS-8. Because there are usually two (or more) parties who could be affected by a determination of employment status, the IRS attempts to get information from all parties involved by sending those parties blank Forms SS-8 for completion. Some or all of the information provided on this Form SS-8 may be shared with the other parties listed on page 1. The case will be assigned to a technician who will review the facts, apply the law, and render a decision. The technician may ask for additional information from the requestor, from other involved parties, or from third parties that could help clarify the work relationship before rendering a decision. The IRS will generally issue a formal determination to the firm or payer (if that is a different entity), and will send a copy to the worker. A determination letter applies only to a worker (or a class of workers) requesting it, and the decision is binding on the IRS. In certain cases, a formal determination will not be issued. Instead, an information letter may be issued. Although an information letter is advisory only and is not binding on the IRS, it may be used to assist the worker to fulfill his or her federal tax obligations. Neither the SS-8 determination process nor the review of any records in connection with the determination constitutes an examination (audit) of any federal tax return. If the periods under consideration have previously been examined, the SS-8 determination process will not constitute a reexamination under IRS reopening procedures. Because this is not an examination of any federal tax return, the appeal rights available in connection with an examination do not apply to an SS-8 determination. However, if you disagree with a determination and you have additional information concerning the work relationship that you believe was not previously considered, you may request that the determining office reconsider the determination. Completing Form SS-8 Additional copies of this form may be obtained by calling TAX-FORM ( ) or from the IRS website at Fee There is no fee for requesting an SS-8 determination letter. Signature Form SS-8 must be signed and dated by the taxpayer. A stamped signature will not be accepted. The person who signs for a corporation must be an officer of the corporation who has personal knowledge of the facts. If the corporation is a member of an affiliated group filing a consolidated return, it must be signed by an officer of the common parent of the group. The person signing for a trust, partnership, or limited liability company must be, respectively, a trustee, general partner, or member-manager who has personal knowledge of the facts. Where To File Send the completed Form SS-8 to the address listed below for the firm s location. However, only for cases involving federal agencies, send Form SS-8 to the Internal Revenue Service, Attn: CC:CORP:T:C, Ben Franklin Station, P.O. Box 7604, Washington, DC Firm s location: Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin, Wyoming, American Samoa, Guam, Puerto Rico, U.S. Virgin Islands Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, all other locations not listed Instructions for Workers Send to: Page 4 Answer all questions as completely as possible. Attach additional sheets if you need more space. Provide information for all years the worker provided services for the firm. Determinations are based on the entire relationship between the firm and the worker. Also indicate if there were any significant changes in the work relationship over the service term. Internal Revenue Service SS-8 Determinations P.O. Box 630 Stop 631 Holtsville, NY Internal Revenue Service SS-8 Determinations 40 Lakemont Road Newport, VT If you are requesting a determination for more than one firm, complete a separate Form SS-8 for each firm. Form SS-8 is not a claim for refund of social security and Medicare taxes or federal income tax withholding. CAUTION

29 Form SS-8 (Rev ) If the IRS determines that you are an employee, you are responsible for filing an amended return for any corrections related to this decision. A determination that a worker is an employee does not necessarily reduce any current or prior tax liability. For more information, call Time for filing a claim for refund. Generally, you must file your claim for a credit or refund within 3 years from the date your original return was filed or within 2 years from the date the tax was paid, whichever is later. Filing Form SS-8 does not prevent the expiration of the time in which a claim for a refund must be filed. If you are concerned about a refund, and the statute of limitations for filing a claim for refund for the year(s) at issue has not yet expired, you should file Form 1040X, Amended U.S. Individual Income Tax Return, to protect your statute of limitations. File a separate Form 1040X for each year. On the Form 1040X you file, do not complete lines 1 through 24 on the form. Write Protective Claim at the top of the form, sign and date it. In addition, you should enter the following statement in Part II, Explanation of Changes: Filed Form SS-8 with the Internal Revenue Service Office in (Holtsville, NY; Newport, VT; or Washington, DC; as appropriate). By filing this protective claim, I reserve the right to file a claim for any refund that may be due after a determination of my employment tax status has been completed. Filing Form SS-8 does not alter the requirement to timely file an income tax return. Do not delay filing your tax return in anticipation of an answer to your SS-8 request. In addition, if applicable, do not delay in responding to a request for payment while waiting for a determination of your worker status. Instructions for Firms If a worker has requested a determination of his or her status while working for you, you will receive a request from the IRS to complete a Form SS-8. In cases of this type, the IRS usually gives each party an opportunity to present a statement of the facts because any decision will affect the employment tax status of the parties. Failure to respond to this request will not prevent the IRS from issuing a determination letter based on the information he or she has made available so that the worker may fulfill his or her federal tax obligations. However, the information that you provide is extremely valuable in determining the status of the worker. If you are requesting a determination for a particular class of worker, complete the form for one individual who is representative of the class of workers whose status is in question. If you want a written determination for more than one class of workers, complete a separate Form SS-8 for one worker from each class whose status is typical of that class. A written determination for any worker will apply to other workers of the same class if the facts are not materially different for these workers. Please provide a list of names and addresses of all workers potentially affected by this determination. If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker under section 530 of the Page Revenue Act. However, this relief provision cannot be considered in conjunction with a Form SS-8 determination because the determination does not constitute an examination of any tax return. For more information regarding section 530 of the 1978 Revenue Act and to determine if you qualify for relief under this section, you may visit the IRS website at Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. This information will be used to determine the employment status of the worker(s) described on the form. Subtitle C, Employment Taxes, of the Internal Revenue Code imposes employment taxes on wages. Sections 3121(d), 3306(a), and 3401(c) and (d) and the related regulations define employee and employer for purposes of employment taxes imposed under Subtitle C. Section 6001 authorizes the IRS to request information needed to determine if a worker(s) or firm is subject to these taxes. Section 6109 requires you to provide your taxpayer identification number. Neither workers nor firms are required to request a status determination, but if you choose to do so, you must provide the information requested on this form. Failure to provide the requested information may prevent us from making a status determination. If any worker or the firm has requested a status determination and you are being asked to provide information for use in that determination, you are not required to provide the requested information. However, failure to provide such information will prevent the IRS from considering it in making the status determination. Providing false or fraudulent information may subject you to penalties. Routine uses of this information include providing it to the Department of Justice for use in civil and criminal litigation, to the Social Security Administration for the administration of social security programs, and to cities, states, and the District of Columbia for the administration of their tax laws. We may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. We may provide this information to the affected worker(s), the firm, or payer as part of the status determination process. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 22 hrs.; Learning about the law or the form, 47 min.; and Preparing and sending the form to the IRS, 1 hr., 11 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC Do not send the tax form to this address. Instead, see Where To File on page 4.