I have been working with this specific company for 5 months as a 1099 employee. This makes me self-employed, which isn't what I really wanted, but it got my foot into the door (I am 24) for an actual career.
Their reasons for making me self-employed were that the state of California makes it hard for them to pay me due to all of their employment laws. My official title is "Technical Sales Rep" and my job is to be the sales representative in Orange and LA Counties for this particular company. I am the only person in California being paid to sell this product. It is a national company, but they only had a Western Regional Sales manager who is based in Arizona and he covers 10 states. Our product has been in stores here for 20 years, so it's not a new product.
I was hired with a salary of $35,000 and a $750 a month expense allowance (for car, health insurance, food, and any other expense). I knew when I took this job that I was getting shafted, but really wanted to take it to build up the experience and use it for future employment. I have been doing this for the past 5 months and not said anything. Today my boss calls me and tells me his boss wants me to turn in call reports on a weekly basis and if I don't I will not get paid.
My first question is can they legally do this if I am self-employed? I understand they can fire me whenever for whatever, but if I am self-employed I have the authority and power to do whatever I feel is fit to perform the job I was asked to do. If I am told when, where, and how to do something, I am an employee of their company. According to the IRS this is the case.
Second, I am not able to cover my entire market on my allowance. Meaning, if I were to drive all over my territory I would spend more in expenses than I would get back. I'll be honest and tell you that I don't cover my entire territory that I am supposed to because of this. I have serviced the entire territory, but not on a consistent basis. For example, I will focus on one area over a month, then switch another the next month, and come back to the first territory the third month. If I were to do my entire territory in a month, I would roughly spend $1100 in expenses and I'm not willing to eat $350 of my own money each month. Especially if I have to pay a 15% self employment tax at the end of every year on my taxes.
Does anyone have experience in this area and know what the true definition of self-employed means?
You have no frame of reference, Donny. You're like a child who walks into the middle of a movie...
I kind of do, but I would recommend that you call the California Division of Labor Standards Enforcement * and get specific information. I live in Nebraska and investigate discrimination law, but some of what I do translates, and we talk to 1099 contractors all the time.
As you said, you are basically a company of one employee, contracting with the larger company to sell Product X. While you are essentially your own corporation and have control over your employee (you), the umbrella company can put demands on you like turning in time sheets, trip charts, call sheets, etc. without compromising that contract relationship.
Working like this is pretty difficult, and I wouldn't wish this on someone as their first job out of college. You need to bone up on California employment law and be sure your rights are protected.
* Your local office should be: 320 West 4th Street, Suite 450, Los Angeles, CA 90013 (213) 620-6330
Interesting to hear from your synopsis that you're a salaried employee with the company and yet, the company treats you like a consultant, and thus, can be taxed as such for this tax season. When you signed the contract, was it made clear that you were accounted for on the payroll? If so, this in effect makes you an employee and it won't be your responsibility to pay whatever taxes you'll pay as a "vendor". If that's not the case, did you have to submit a W-9 form? You can't be paid as a consultant unless you sent it to this company.
Also, check your agreement to see your basis of pay. From what it sounds like, you're paid a flat fee for every given period that will amount to $35k by year's end. If you're only paid for hours billable and assuming you're putting a full day's work, then the company can demand you for time sheets, call reports, etc. My former employer usually held strict policy in this with our development consultants that were billed on an hourly basis per the agreement signed before any projects began. However, one of my colleagues who was paid a fixed consulting fee per every given period, wasn't disputed for the hours he worked and sometimes, he didn't put in the full 8 hours a day working from home as a consultant. Being paid as such usually means that the work is done for the time elapsed no matter the number of hours (act of good faith), much like an employee would.
Another thing is, just because you're reporting to someone who tells you exactly what to do and how to do it, doesn't exactly mean you're an employee automatically. It's normal to have a consultant to be compliant to the core requirements of the job and the duties bestowed as seen fit by the management of the company (otherwise there's a good chance the job won't be done in the best interest of the company). The difference between a consultant and an employee is that a consultant also reports to another entity (whether it's themselves or the company they're hired to), but it depends on the agreement made. That's why I ask if you're officially on the payroll. The IRS can't tax you if you were.
Check out the California Labor Board. I forget the web address, but they can give you a clearer answer to your grievance.
And to answer your thread question, yes I'm self employed.
The Artful Dodger wrote:Interesting to hear from your synopsis that you're a salaried employee with the company and yet, the company treats you like a consultant, and thus, can be taxed as such for this tax season. When you signed the contract, was it made clear that you were accounted for on the payroll? If so, this in effect makes you an employee and it won't be your responsibility to pay whatever taxes you'll pay as a "vendor". If that's not the case, did you have to submit a W-9 form? You can't be paid as a consultant unless you sent it to this company.
He's a 1099 employee, meaning he's a self-contractor, and not an on-the-payroll employee.