Hello. As I'm sure you can see, this is my first post here. Thank you all for indulging me. I hope to get some insight into a perplexing situation I have at hand. I apologize for being long winded but the details are such that it may take that to fully explain it.

Here's the question first:

If someone is fired from their job, a non-desk job, non-9-5 job, and then is hired to do the same job as a freelance contract laborer, are there any special rules or regulations that the employer has to be wary of regarding things like FICA or benefits or anything like that?

I'm asking because I recently had to release an employee in my department. It was the company's and my intention to replace him, which we could because we dismissed him rather than laying him off.

So. The company dismissed this person, then business conditions changed and the decision was made NOT to replace him just yet due to the possibility of one of our clients leaving. The idea is not to replace him full time, only to be forced to cull another person if/when we lose the other client. Generally speaking I agree with this since I don't want to have to cut anyone else. BUT, we still have the client and definitely have the workload for this person.

So, since this person I'm trying to hire back as a freelancer (he REALLY wants the job) is by FAR the best suited to handle the tasks necessary in the short run, it makes great sense to hire him for this task. All the powers that be agree that this is true.

The trouble is, HR is pushing back saying that we'd be opening ourselves up to trouble with the IRS or Labor Department or something if we brought him back to do his old job even as contract labor because the regulating body (whoever that is) could penalize us or something on the premise that we're trying to get around paying him his benefits, etc as a fulltime regular employee by hiring him as a freelancer. Is that true???

Make NO mistake, this is the type of work where I'll hand him a project or several projects, then let him roll. I won't be telling him what time to come in or when his breaks are or anything like that. He'll truly be an independent contract employee.

Can anyone shed some light on this for me? I'd really like to hire this fellow because he's the best solution I have at hand, but don't want to put the company at risk of litigation or anything like that.

All thoughts are very welcome.

Thanks.

Have you drawn up the contract you are going to use yet?

we have a standard confidentiality agreement sort of thing. We use it for ALL of our freelancers.

Not a non disclosure... the actual contract you will use to outline the work/pay/benefits structure for contract (hence the term) labor?

HR is pushing back saying that we'd be opening ourselves up to trouble with the IRS or Labor Department or something if we brought him back to do his old job even as contract labor because the regulating body (whoever that is) could penalize us or something on the premise that we're trying to get around paying him his benefits, etc as a fulltime regular employee by hiring him as a freelancer. Is that true???

It is ABSOLUTELY true. It almost never happens that someone who has been an employee can do the same job as an IC and meet the legal criteria for an IC. Maybe this is one of the rare exceptions but blue moons come more often. It's a very valid concern.

regarding the contract. I've looked at it again. It's really nothing but a non-disclosure/confidentiality agreement.

As far be absolutely at risk. What are we absolutely at risk of running afoul of? What would be the penalties? What ARE the legal criteria for an IC?

Thanks.

http://www.dol.gov/esa/regs/compliance/whd/whdfs15.htm

See page 22 here for failure to deposit withheld federal taxes.
http://www.dol.gov/esa/regs/compliance/whd/whdfs15.htm

The employer can also be penalized for failing to withhold when they should have, up to 100% of what should have been withheld.

And this is just federal. There would also be similar state penalties. Why would the employer even want to open themselves up to this?:confused:

Unfortunately, despite what I think are reasonably well developed skills, I couldn't figure out how to navigate to a page 22.

Any insights you might have to guide me to that page would be greatly appreciated.

Thanks.

Unfortunately, despite what I think are reasonably well developed skills, I couldn't figure out how to navigate to a page 22.

Any insights you might have to guide me to that page would be greatly appreciated.

Thanks.


Oops, sorry, previous link. :o
http://www.irs.gov/pub/irs-pdf/p15.pdf

Thanks.

One thing that's weird is that the former employee in question has a sister who is in HR. She's convinced that it's OK to dismiss someone, then hire them back as freelancer for principally the same job, or at least PART of the same job without any risk whatsoever. In fact, the employee in question mentions that he once was dismissed from a previous job and was subsequently hired back as a freelancer for the bulk of most of the next six months.

Lastly his sister once even hired back someone as a freelancer while the person was getting severance pay.

I know I'll have a very tough task convincing my HR person to allow us to hire him back as a freelancer, but it baffles me why other places have done this same thing and seem to have no problems.

Thanks for any and all insight.

The sister needs to go back to HR school. She dodged a bullet - that doesn't mean that hiring the employee back as a freelancer was done legally.

I won't be at all surprised if you have trouble convincing HR to go ahead with this. Be prepared to lose the battle.