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We made a small independent film last year, and hired a crew

for 2 months. Everybody was...
We made a small independent film last year, and hired a crew for 2 months. Everybody was paid with 1099s (except the actors) and covered with a Certificate of Liability Insurance. Months later, we received notification of a $60,000 (!!) fine from the Department of Labor's Unemployment Insurance Division informing us that our 2nd Assistant Director was reclassified as an employee and we owe her Unemployment Insurance, not to mention the fine. And NYS now wants to do a full audit, even though the person in question never filed an unemployment claim and insists that she took the job as an independent contractor. Given that we have no money and would literally have to fundraise from family/friends to pay any fines, hire accountants/lawyers, this is really upsetting. Any guidance on how best to proceed would be really appreciated!!!!
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Answered in 1 minute by:
7/22/2013
wallstreetfighter
wallstreetfighter, Employment Lawyer
Category: Employment Law
Satisfied Customers: 17,252
Experience: 14 years exp, General counsel for National Corp. firms, Hostos College instructor, Represented employees in discrimination lawsuits
Verified

wallstreetfighter :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarification

wallstreetfighter :

This is common is NY, and in fact many small companies face the same issue,

wallstreetfighter :

what you have to do is show that they were not employees but contractors, you would also have to show that you do not have the money to pay the fines, nor any penalty,

wallstreetfighter :

and if they try to force you the only way they can do this is to obtain a judgment against your corporation,

wallstreetfighter :

what many individuals do at that point is close the corporation, and re open a new corporation and start again,

wallstreetfighter :

they will accept a payment plan and reduction of the fines, if you can show you had limited income,

Customer:

is there a way to show that she was an independent contractor and not an employee and put a stop to this whole process before it spins out of control?

wallstreetfighter :

you should speak to her, you should use the IRS rules, which state:

wallstreetfighter :

opic 762 - Independent Contractor vs. Employee


For federal tax purposes, the usual common law rules are applicable to determine whether a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker and the business. All evidence of the degree of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Relationship of the Parties.


Behavioral Control covers facts that show whether the business has a right to direct and control what work is accomplished and how the work is done, through instructions, training, or other means.


Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job. This includes:



  • The extent to which the worker has unreimbursed business expenses

  • The extent of the worker's investment in the facilities or tools used in performing services

  • The extent to which the worker makes his or her services available to the relevant market

  • How the business pays the worker, and

  • The extent to which the worker can realize a profit or incur a loss


 


Relationship of the Parties covers facts that show the type of relationship the parties had. This includes:



  • Written contracts describing the relationship the parties intended to create

  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay

  • The permanency of the relationship, and

  • The extent to which services performed by the worker are a key aspect of the regular business of the company

wallstreetfighter :

If she worked for others during this time,

wallstreetfighter :

and if she controlled her hours and days of work, that would be evidence,

wallstreetfighter :

if you were controlling her hours and days of work, and she had no independance they could claim her as an employee

wallstreetfighter :

she may also agree to sign a independant contract agreement as well

Customer:

i'm sure that she would be happy to sign an independent contract agreement ... would this need to be backdated? are there any templates? THANK YOU .. this is really helpful

wallstreetfighter :

a free form is available at the above link,

Customer:

fantastic. do you think that if she signed the contract and she sent it to the Dept of Labor, then the fines and the audit might just go away???

wallstreetfighter :

she could sign it, you could back date it, however the signatures should show that is was signed recently, you could state that an IC agreement was verbal and now put into writing

wallstreetfighter :

I doubt it,

wallstreetfighter :

if she states that she was a contractor as per the IRS rules,

wallstreetfighter :

stated above they should reconsider.

Customer:

is there anything else you would advise to increase our chances of this going away?

wallstreetfighter :

with the agreement

wallstreetfighter :

I would contact them as soon as possible and stick to the argument she was a contractor,

wallstreetfighter :

and she set her own hours, and time of work,

wallstreetfighter :

and was allowed to work on other projects at the same time,

wallstreetfighter :

with her statements in support,

wallstreetfighter :

you should be able to get this case settled or dismissed.

Customer:

final question: is it advisable or not to let them know that the costs associated with an audit would bankrupt our little company?

wallstreetfighter :

yes, you should advise them of this, and you can show them your last tax return as well

wallstreetfighter :

the $60,000 number is XXXXX to shock and scare employers,

Customer:

excellent. we'll ask the accountant. the asset we currently have is the film, which will hopefully be sold over the next few months .... so would it be advisable to transfer this asset to our new production company, or would that look like deception???

wallstreetfighter :

I would be surprised it they do not settle for $1000 or less

Customer:

wow. that is the best news i've gotten in a month!!!!!!!!

wallstreetfighter :

I would create a new corp any way to protect the film,

wallstreetfighter :

Good luck, and if you have any further questions please do not hesitate to ask for Wallstreetfighter esq.

wallstreetfighter :

If satisfied with our service please provide us with positive feedback.

wallstreetfighter :

Thank you

Customer:

that's great to know. and we'll definitely ask for you personally if we need to come back here :)

Customer:

THANK YOU!!!

wallstreetfighter :

good luck

wallstreetfighter
wallstreetfighter, Employment Lawyer
Category: Employment Law
Satisfied Customers: 17,252
Experience: 14 years exp, General counsel for National Corp. firms, Hostos College instructor, Represented employees in discrimination lawsuits
Verified
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wallstreetfighter
wallstreetfighter
wallstreetfighter, Employment Lawyer
Category: Employment Law
Satisfied Customers: 17,252
17,252 Satisfied Customers
Experience: 14 years exp, General counsel for National Corp. firms, Hostos College instructor, Represented employees in discrimination lawsuits

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