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So long as you did not conspire with the other employer here, and couldn't control the employer's actions, I don't see how you could be exposed to any liability. Essentially it would be a two employer scenario. The other employer could get into trouble, but if you had no control over that, and were not benefiting from that arrangement, then there was no wrongdoing on your part. I don't see how you could face any hazards in that scenario that you're mentioning.
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Since the other eployer has essentially paid him as an independent contractor, is it concievable he is protected if he supplies the individual that has done the work with a 1099?
It is possible, yes.
But he would still have to qualify as a 1099 contractor under the IRS regulations for contractors vs. employees...
We have worked for my friend on the same property as both a company under my business (legitamately) and as individual sub-contractors in which, he was paid cash.
(that's how it's determined if someone is a contractor or employee)
I can't say for certain one way or the other without a very detailed understanding of the situation, and even then, I might come to a different conclusion than a court would.
But again, so long as there was no collusion with this friend, etc... then I don't see how you personally would have liability.
It gets dicey as he was still under my direction some of the time
But when you paid him as an employee, you would pay legitimately, correct? That is, when he was working under your direction, he was either being paid by you (on the books) or being paid by the employer friend (and you were told to manage him, etc...)? That is, you did not actually benefit financially from him being paid off the books?
Correct. The only time I show financial benefit is by check from client and labor paid out by check.
Understood, and that's what I thought. Again, I don't see how you would have any liability here, as it appears that you've followed the formalities. If the general contractor has not, then that would be on him, not you.
Understood. Thank You