Employee means "all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours per month. This includes employees obtained from a temporary employee agency, leasing concern, or through a union agreement or co-employed pursuant to a professional employer organization agreement." The SBA will consider the totality of the circumstances , including criteria used by the IRS for Federal income tax purposes and those set forth in SBA's Size Policy Statement No. 1, in determining whether individuals are employees of a concern.
Under the totality of the circumstances test, one of the test factors that they may fail is:
"9. Do the employees perform tasks normally performed by the regular employees of the business or which were previously performed by the company's own employees?"
So, I agree with you that this does not appear to be legal.
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