Question

For this assignment, you will write a paper explaining employee vs. independent contractor classifications using the Madrid and Berne case scenario provided below.

Scenario:

Madrid and Berne is a top-rated accounting firm with offices in Phoenix and Tucson. Madrid and Berne wanted to provide bookkeeping as an additional service to its clients. It has hired Joan Newman Business Services, with offices in Phoenix, Flagstaff, Tucson, and Yuma, to perform contract bookkeeping services for Madrid and Berne clients who request and need such services. Madrid and Berne entered into an independent contractor agreement with Joan Newman Business Services that states that Joan is an independent contractor and agrees that her business is an independent contractor of Madrid and Berne.

After entering in to the agreement, Joan worked only on jobs assigned by the employer and was paid a commission for the work. The commission was based on the fees determined by Madrid and Berne and paid by the clients to Madrid and Berne. Joan was paid on a weekly basis. She used available and unused office space at Madrid and Berne, along with Madrid and Berne's equipment and supplies. This made it easier for clients to utilize Joan's services and to be familiar with the offices. Madrid and Berne reviewed Joan's work and was able to return faulty work to Joan for corrections before it delivered the work to the clients.

Provide a written analysis of the rules for distinguishing between employee and independent contractor.

Determine whether Joan should be treated as an employee or independent contractor.  

What are all the key factors for determining classification in the scenario above? Use the concepts that have been presented so far in the course and your own research for this case study.

In your conclusion, explain which classification you believe applies to Joan—employee or independent contractor.

Answer 1

Employee Vs Independent contractor:

• An employee is someone who works full time for the organization, whereas independent contractor is someone who provides only consulting services to the organization
• An employee is obliged to work for the set time period by the employers, on the other hand an independent contractor is someone who is not bound to work for the set time period as employees.
• Employees are eligible for additional benefits such as health and disability insurance, on the other hand an independent contractor is not eligible for any kind of benefits offered by the employer.
• Employees are paid fixed amount of salary on monthly basis, whereas independent contractors are paid according to the contract signed by them or the amount of services rendered to the clients.
• Employees are paid only on monthly basis, on the other hand independent contractors can be paid on weekly basis as well.
• Employees are not paid commission for extra work done by them within the working hours, on the other hand independent contractors are paid commission for the work done by them.

If Joan should be treated as an employee or independent contractor:

After studying the scenario, it can be said that Joan can be treated as an independent contractor who is working with the company and offering its specialized services to the company on contractual basis.

Factors on the basis of which Joan is classified as independent contractor:

Joan is considered as an independent contractor due to the following reasons:

• Joan was paid on weekly basis, for the services rendered and not on monthly basis. This makes it clear that she is not an employee of the organization.
• Joan was paid commission for the services she renders to the clients and not a fixed amount of salary. This makes clear that she was an independent contractor.
• Joan is not provided with any kind of additional employment benefits, hence making it clear that she is not an employee but an independent director for the organization.
• Joan is not bound to work within the office premises and works separately in some other location for serving the clients. This shows that she is not an employee but an independent contractor.