Legality of FTE reporting to 1099 Contractor?
April 2, 2010 10:11 AM   Subscribe

In New York state, is it legal for a company to have one of its full-time employees reporting directly to a 1099 contractor?

I work for a division of a large corporation. Within this division, I am focused largely on one product. I am the only full-time employee on this product, which has 10 full-time contractors. My division is being shuttered at the end of this month, and my current boss will be laid off, but this one *product* is going to continue - and be folded into another division (which division is still TBD). In the meantime, I've just been shown an org chart which would have me reporting directly to a contractor. Anyone know if this is technically legal?
posted by MaxVonCretin to Work & Money (13 answers total)
Are you sure you don't have a direct superior within the company? It could just be that the purpose of the org chart is to convey business process.
posted by circular at 10:20 AM on April 2, 2010

I don't know the answer, but if you are sure this person is your "boss" and the situation is not like circular brings up, then I think the best places to start to find an authoritative answer would be the NY State Dept. of Labor, or possibly the NY State Attorney General's office.

Presumably, one of those will be able to address your question much better than here.
posted by edgeways at 10:25 AM on April 2, 2010

What makes you think this scenario is, or should be, illegal?
posted by Admiral Haddock at 10:33 AM on April 2, 2010

(what Adm. Haddock said)
posted by bitdamaged at 10:55 AM on April 2, 2010

Not trying to put words in OP's mouth, but I suspect the question really is: can a company legally have someone not officially with the company be the boss (and part of the official organization chart for that matter) of long term company employees.
posted by edgeways at 11:07 AM on April 2, 2010

(I understand the question, but I'm not sure why this would be illegal)
posted by bitdamaged at 11:18 AM on April 2, 2010

This is an very common practice in many industries. Nothing illegal about it at all. Org chart boxes are filled by the most qualified person whether employee or contractor. It may conflict with some union contracts, but that is a different question. What can get sticky is when the contractor starts looking more like an employee in the eyes of the IRS, but that is a tax issue.
posted by JackFlash at 11:31 AM on April 2, 2010

According to this page from the NY State Dept. of Labor:
Remember that the real distinction between the employer-employee relationship and the independent contractor relationship depends primarily on the level of supervision, direction and control exercised by the person engaging the services.
So, to me, the possible weirdness of the situation is as follows: The OP is considered an employee, so they are supposed to be under the supervision/direction/control of the company. The OP's boss is considered a contractor, so they are supposed to not be under the same supervision/direction/control. By what means is the company exercising supervision/direction/control over the OP? In my mind, the only thing which might (emphasis on might) be going on here is that the contractor boss may be incorrectly classified as a contractor.

Also, note that the terms "contractor" and "employee" are terms of art and may diverge from common usage. For example, I know some people just call anyone getting a 1099 instead of a W-2 a contractor. However, the State of New York doesn't see it this way:
If an employer-employee relationship exists, it does not matter how the relationship is described by the person engaging the services. For example, if you issue individuals a 1099 form rather than a W-2 form, they may still be employees.
posted by mhum at 11:40 AM on April 2, 2010

Mhum, I see your point, but I don't think an employee reporting to a contractor is so fundamentally incompatible with their traditional roles. At the end of the day, the employer can still tell the employee what to do and how to do it; likewise, the contractor (if s/he really is a contractor) is still free to complete the project as s/he sees fit, within the scope of his or her engagement. This strikes me as being similar to when management consultants become "deputized" to improve operations at a business--they're still contractors, and the employees are still employees, but the employees are often told to do what the consultants tell them to do.

OP, I am not your attorney, and this is not legal advice; you should consult with the NYS Department of Labor and your own employment lawyer.
posted by Admiral Haddock at 12:13 PM on April 2, 2010

Agree with Admiral Haddock
posted by dfriedman at 1:05 PM on April 2, 2010

Admiral Haddock: I don't think an employee reporting to a contractor is so fundamentally incompatible with their traditional roles

I largely agree. It would probably be out of bounds to exclude all such instances. Yet, as the Dept. of Labor says, these things are extremely dependent on the exact nature of the situation so it'd be up to lawyers and/or government inspectors to figure it out for sure.
posted by mhum at 1:29 PM on April 2, 2010

Look at it from different angles:

- (I'm not scolding, just reframing) It is none of your business how anyone else is paid. You were hired to do something, and someone else was hired to be your supervisor.

- Subcontractors do this all the time. They work for one company, and employees of some other company tell them what to do.
posted by gjc at 4:35 PM on April 2, 2010

As others have noted, it's entirely possible that your supervisor is not really a contractor but rather an employee, but it's entirely possible that he/she is not. The lines are somewhat vague, usually have more to do with actual job duties rather than titles and formal descriptions, and governments are cracking down lately on miscategorized contractors.

However, unless you're in HR or legal, this is all somewhat beside the point. Your boss may well be classified improperly, but that doesn't have anything to do with your rights in the workplace. I would ensure that you will continue to work as an employee of the company (rather than an employee of the contractor), and assuming that's the case, there's not much more you can do. If the contractor wants to argue his/her employment status, that's not your ballgame.
posted by zachlipton at 5:22 PM on April 2, 2010

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