Human Resource Blog

1099 for Temps??

I work for a fitness company in Pennsylvania that has 7 locations, with a regular staff of about 10-20 employees per club. Occasionally, specific promotions (1-2 weeks duration) mean that we need additional help to handle the high volume of members.

Note: I was recently hired as HR Manager, as we currently have NO HR department AT ALL (all issues were previously handled by our *only* office manager, who would consult our lawyer when needed). This is one of MANY issues I am untangling.

We have these promotions quarterly, and in the past, these temporary workers were filling out 1099 forms instead of W4s. I am unsure as to why this decision was made, but from what I understand “the lawyer said it is fine to pay them that way”.

My issue is, we tell these temps when and how to work. I was under the impression that 1099 is mainly for independent contractors, and if you decide when and how someone works, they are NOT an independent contractor. Is this true? Or are there exceptions?

Should we be hiring these temporary workers as part-time employees? We currently DO have a sign-off that they are being hired to fill a temporary position for [date-date] and that if they are interested in regular employment their application will be considered following the promotion, but a position is NOT guaranteed.

I do not want to be met later with issues of misclassifying employees as 1099. I would like to run the next promotion knowing we are compensating all employees properly.

Thank you!

You are absolutely right – these temporary workers are employees, not independent contractors. Since you tell the temporary employees when, where and how to work they are not genuinely 1099 workers (independent contractors) under federal law.  In recent years, many accountants and lawyers have given employers the advice to misclassify workers as contractors. Unfortunately, states and the federal Department of Labor are prosecuting many employers for this illegal attempt to avoid labor laws.

(It is possible that the lawyer involved does not specialize in employment law, but is a lawyer in general practice. If he specializes in employment law, he should be familiar with the many multi-million-dollar class action suits brought by the federal and state Department of Labor against employers who classify employees as independent contractors.

It is wise for you to have the employees sign an agreement that they are temporary workers. This prevents them from claiming unemployment. In addition, you should ensure that these temporary employees are being paid at least the minimum wage and being paid overtime if warranted. Another option would be working through a temporary agency to find employees for these events.

It sounds like you have your work cut out for you — feel free to post more questions as they arise.