Cohousing-L Mailing List: Re: Re: paying babysitters and liability

[David Mandel (dlmandel]

Sue:
    What's with this "under your theory" business? I was merely summarizing
the very conventional legal distinction between employee and independent
contractor, plus noting that many employers have gotten in trouble for
trying to wrongly treat someone as a contractor. It happens all the time. I
can tell you're a zealous advocate for your clients, as you should be, but I
think your tone here is a little over the top for a list where we're both
trying to help cooperative communities wade through a potentially sticky
subject.
    Of course I agree with you that hiring an occasional baby-sitter doesn't
trigger the need to pay employment taxes, though I've never heard of a
parent asking a baby-sitter to sign an independent contractor agreement. But
I do think a regular child care arrangement in which the pay exceeds the
quarterly threshold would trigger a FICA withholding obligation (that is
typically ignored in such situations, to the potential peril of future
candidates for public office).  And the line between them is not always
sharp.
    Perhaps I should have given a concrete example, so now I will share the
one that's on my mind, because we've been wrestling with it. We are paying
several community members to do rot-preventive caulking and painting work on
the trim of our houses. One of them, designated to be in charge of the
project on behalf of the community, tells the others what needs to be done,
monitors their work and supplies (from community funds) the tools and
materials necessary. The workers have no particular experience or expertise,
and the job requires only a moderate amount of skill. We pay them all at an
hourly rate and reserve the right to limit how much they work in a given
quarter to avoid having to withhold FICA and pay unemployment insurance. Our
research convinced us that they're definitely employees, not independent
contractors, so in various important ways we must treat them as such. Do you
agree in this case?
David Mandel
Southside Park, Sacramento

----- Original Message ----- 
From: "Sue Pniewski" <SPniewski [at] Habijax.com>
To: <cohousing-l [at] cohousing.org>
Sent: Wednesday, September 17, 2003 6:34 AM
Subject: RE: [C-L]_Re: paying babysitters and liability


>
> If you explicity contract the person to be an independent contractor, they
> can NOT sue you on premise liability successfully using the
> employer/employee standing.  The IRS has nothing to do with premise
> liability.
>
> As for the IRS and tax liability, if they are casual labor, not a
scheduled
> employee, and the place of work may vary, and there is no contract for a
> length of employment, you can make a very good argument that they are a
> contractor.  A  babysitter who occasionally comes to your place, drives
> themselves, gets paid by the event, not a salary, and who provides their
own
> insurance etc., is not going to be classified as an employee.
> Under your theory, every person hiring a babysitter so they can go out for
> the evening is liable for employment taxes.  This is silly, and not what
the
> IRS intends.  It is not feasable that everybody who hires a babysitter
> complete employment forms and the IRS does not have the capacity to handle
> that kind of paperwork in any case.  If you specifically contract to be an
> independent contractor, and follow the guidelines, the IRS risk is
minimal.
>
>
> This is from your article:
> Should I use written agreements when I do independent contract work for
> clients?
>
> Absolutely. Using a written agreement avoids disputes by providing a
written
> description of the services you're supposed to perform, when they are to
be
> performed and how much you will be paid.
>
> A written independent contractor agreement can also help establish your
> independent contractor status. Although an agreement by itself is never
> enough to make a worker an independent contractor, it will help show the
IRS
> and other agencies that both you and the hiring firm intended to create a
> hiring firm-independent contractor relationship, not an employer-employee
> relationship.
>
> When this agreement is combined with the facts of their employment it is
> enough.  Advising that an agreement is not necessary, or that it is not
not
> going to do any good is just WRONG.
>
> -------------------------------------
> Susan Pniewski, Esq.
> General Counsel
> Habitat for Humanity of Jacksonville
>
>
>
> -----Original Message-----
> From: David Mandel [mailto:dlmandel [at] pacbell.net]
> Sent: Wednesday, September 17, 2003 2:22 AM
> To: cohousing-l [at] cohousing.org
> Subject: Re: [C-L]_Re: paying babysitters and liability
>
>
>
> This is very risky advice. Saying someone is an independent contractor
> doesn't make it so. If the work relationship exhibits characteristics of
> employer-employee, then you could be liable for all these things that Sue
is
> saying you can avoid, and you could also be in trouble.
> The main factor is control over when and how the work is to be done. Other
> significant indications are the manner of pay (hourly or daily, etc., vs.
a
> single lump sum for a contracted job); who supplies the tools and
materials;
> level of expertise required; supervision.
> For a more extensive discussion in lay language, look at www.nolo.com,
> specifically a number of articles listed at
>
http://www.nolo.com/lawcenter/index.cfm/catID/EC0EEB1C-16EA-4F81-833ED5890B1
> 9383A/subcatid/0D973BC0-3287-4CA1-944DC75DE82DC59F
> David Mandel
>
> ----- Original Message ----- 
> From: "Sue Pniewski" <SPniewski [at] Habijax.com>
> To: <cohousing-l [at] cohousing.org>
> Sent: Monday, September 15, 2003 6:48 AM
> Subject: RE: [C-L]_Re: paying babysitters and liability
>
>
> >
> > I would suggest if you are to employ anybody as a cash employee, you
> should
> > have them fill out the required I-9 and W-4 and then at the end of the
> year
> > report on a 1099.  Then you would not be expected to pay any employer
> taxes,
> > the employee would be required to sort all of that out themselves.  But,
> to
> > their benefit, they can then deduct a ton of expenses making the payment
> and
> > taxable amount negligible.  YOu should have a stock agreement to use
with
> > everybody that states in clear terms that they are an independent
> > contractor, they are responsible for all injuries, they are responsible
> for
> > all their errors and omissions, and taxes, and they you provide no
> insurance
> > coverage for them.  It should also say they agree to indemnify you for
any
> > and all legal bills incurred as a result of their employment with your
> > group.  Then they will have little leg to stand on in the case of an
> injury,
> > no attorney will take that kind of case without a fat retainer up front,
> > which few people will be willing to part with, and they will still lose
in
> > the end.  You protect yourselves that way from the IRS, liability, and
> from
> > misunderstandings.  I have a form that could be modified to suit your
> needs,
> > I'd be happy to share.
> >
> >
> > -------------------------------------
> > Susan Pniewski, Esq.
> > General Counsel
> > Habitat for Humanity of Jacksonville
> > 904.798.2712  x202
> >
> > 'If you advance confidently in the direction of your dreams; and
> > live the life which you have imagined, you will meet with a success
> > unmatched in common hours...
> > If you have built castles in the air, your work need not be lost;
> > for that is where they should be.
> > Now put the foundations under them.'
> > -Henry David Thoreau
> >
> >
> >
> > -----Original Message-----
> > From: Lynn Nadeau [mailto:welcome [at] olympus.net]
> > Sent: Monday, September 15, 2003 2:24 AM
> > To: cohousing L
> > Subject: [C-L]_Re: paying babysitters and liability
> >
> >
> >
> > >The worst that can happen in any case is that you have a tax audit and
> pay
> > a
> > >fine or back taxes.
> > Lynn here. I didn't make our concern clear. We are not worried about
> > "nanny" laws or unpaid taxes, but about liability suits in the case of
> > injury. Sitter breaks his back while subduing freaked out child, or is
> > tripped by a chair in the kid room, etc. If he were simply a visitor
> > wandering through RoseWind, and broke his leg in a hole on the commons,
> > it would be paid by our general liability coverage. But such coverage is
> > void if the person is there for pay.
> >
> > The bad experience we had was with a fellow who was doing a leftover job
> > at the end of our common-house construction. This once, we didn't go the
> > cautious route and hire him through the co-op which dealt with his
Social
> > Security, workman's comp premiums, etc. Instead we paid him cash, with
> > the implicit understanding that either he'd pay his own insurance, or
> > take the risk of not having any in place. He fell off a ladder (never
> > even alleging any negligence on our part) and the long story that ensued
> > cost us many many person hours and thousands of dollars  in legal
> > counsel, without it ever even going to a lawsuit. We ended up in trouble
> > with L&I and the IRS, with back payments and penalties, but mainly we
> > were scared we might get sued by him for all sorts of damages: at one
> > point we heard the possible figure of $400,000!
> >
> > It seems unlikely that a babysitter would get hurt and sue us for it,
but
> > the above scenario also seemed unlikely, given that the fellow was a
> > friend and seemed very laid-back. Then they talk to their spouse or
> > neighbor and it's whiplash and mental anguish and lost pay and who knows
> > what else.
> >
> > As for having a separate "club" account, we do something like that for
> > our meal accounting,  but it's easy to show that that money really does
> > stay in a closed loop for food purchases. If we use the "club" account
to
> > hide the fact that we are paying a sitter, any insurance investigator
> > worth her salary could figure that out. Even from our emails discussing
> > how to avoid the liability!
> >
> > Lynn Nadeau, RoseWind Cohousing
> > Port Townsend Washington (Victorian seaport, music, art, nature)
> > http://www.rosewind.org
> > http://www.ptguide.com
> > http://www.ptforpeace.info (very active peace movement here- see our
> > photo)
> >
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