Billion Dollar Blueprint: Employee or independent contractor? - FOX 8, WVUE, fox8live.com, weather, app, news, saints

Billion Dollar Blueprint: Employee or independent contractor?

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NEW ORLEANS (WVUE) -

This story comes down to this question: What's the difference between an independent contractor and employee?

If you've ever looked at your pay stub from work, you'll likely see a series of deductions, taxes taken out of your income. You pay a Social Security and Medicare tax, federal and state income taxes.

If those taxes are taken out by your boss, it means you're considered an employee. If not, you're considered an independent contractor, and you have to pay those taxes to the government on your own.

Here's why it's important, and why the government could be missing out on tens of millions of dollars from Louisiana every year.

On most of these large construction projects, the public entity hires a general contractor - the big company in charge of the work. That general contractor often spreads out much of the work among subcontractors.  One subcontractor may specialize in drywall, another as an electrician. 

Our investigation has found some of these subcontractors may be breaking the law by labeling their employees as independent contractors, instead of employees.  So those businesses are not paying taxes.

It allows them to pocket more money.  Instead of paying the government, they're keeping the money in their own pockets.

It's not up to a business to decide how to label an employee; the state has strict guidelines. According to the Louisiana Workforce Commission, a business has to answer yes to all three of these questions to label someone an independent contractor:

  • Is the worker free from control or direction?
  • Is this service outside the normal course of the business?  In other words, the worker would have to be performing a service the company normally doesn't provide.
  • And, is the worker engaged in an independent business or profession?

Again, a "yes" answer to all three of those questions is the only way the state allows a business to label someone an independent contractor. If any of those scenarios don't exist, you're an employee - and your business should be paying taxes.

The federal government has been even more direct, using a carpenter as an example.

The U.S. Department of Labor says, if a carpenter operates his or her own business, he can be an independent contractor. But if the carpenter is economically dependent on an employer, relies on that employer to line up work, then the worker is an employee - and the employer must pay all of those taxes.

Copyright 2015 WVUE. All rights reserved.

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