I work for an employer that is not getting good janitorial services. I want to start a company (separate Fed ID #) to provide these janitorial services after hours as contract labor to this employer. My employer is concerned that since I'm already an employee that he would be subject to pay me OT for any hours over 40 hours, regardless of whether it is under this separate company or not, since I already have an employee-employer relationship with them (i.e., it's not an arms-length relationship). Can I work under my other company's ID for my employer when I'm not working for my employer as an employee without OT ramifications?

It is legally a bit more complicated then whether or not the worker has a separate ID. There are a number of factors that must be looked at and the totality of the factors determine the worker classfication. Even if you and the customer (independant contractors do not have employers) agree on the classification, the government does not have to and the government has a financial incentive to not agree with the classification. I will including a pointer to the rules on worker classification for IRS and federal DOL. Your state probably also has it's own rules.

http://payroll-taxes.com/articles/art2.html

http://www.dol.gov/esa/regs/compliance/whd/whdfs13.pdf

As an employer, I would have a real problem with an employee doing this, even with his/her own EIN if my company was the only customer of the employee.

I have, in nearly 20 years, had TWO employees provide services outside the scope of their employment as contractors. One was a part-time employee (so there was never any question of overtime, but straight pay could have been an issue). He had his own business, with his wife, and had quite a few customers. I saw no problem and we engaged him to take care of us.

The other employee is full-time and has a side business as a locksmith, a specialty trade that is way outside what we do. We call on him from time to time to fix locks at the office.

IMO, there would be NO issue at all from the standpoint of employer-employee if you had an EIN and HIRED someone (not working for the company that employees you) to work for you providing the service to your company, and, if you are lucky, others. There is a demand for that kind of service and too many fly-by-night operations with low standards are just begging to be replaced.

Thanks for the replies DAW and ScottB. Scott, am I reading your post to really say that you would NOT have a problem with this as noted in your first sentence. The rest of your comment seems to read that you are comfortable with using contractors that work for you when they already have an employee-employer relationship with you. Would you still feel the same way if your employees were doing similar work for you (i.e., if I was a maintenance man doing janitorial services on the side and my employer happened to be one of my customers)?

Thanks again for the feedback and your time/thoughts.

Let me clarify, then.

I would not allow you, as an employee, to provide me with ANY services as a vendor unless you have an established business providing those same services to other customers.

The carpet cleaning employee and the locksmith employee have businesses and other customers. They can have me as a customer, too.

On the other hand, we have an office worker who happens to be an experienced painter, but she does NOT do that as a business. We could hire an outside painter. We prefer to use her, at a higher rate of pay than what she gets for office work and with the potential for overtime.

Thanks, ScottB. That's crystal clear for me. I appreciate the followup on this matter.