If our company is forcing all service provider employees to become 1099 straight commission contractors but I’m a manager who does more than just services, is this allowable?

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If our company is forcing all service provider employees to become 1099 straight commission contractors but I’m a manager who does more than just services, is this allowable?

It’s a private company based out of Canada. We are currently hourly vs. commission. The new pay plan will be straight hourly. I’m in MI.

Asked on July 9, 2019 under Employment Labor Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 1 year ago | Contributor

While they could change a salaried employee to hourly (or vice versa), they cannot make people who do not meet the criteria to be independent contractors (e.g. 1099 contractors) into independent contractors; they will remain employees. The law ignores what the employer wants to call the relationship and looks at its actual facts. If you work hours set by the employer, at an employer-defined location, and are subject to being told how to do your job and what to do by your higher-ups, you are almost certainly an employee, and must be paid/compensated like an employee (e.g. they pay the employer portion of social security and Medicare; you get health insurance or vacation, if employees get those things; etc.) regardless of what they want to call you. So, changing you to hourly? That is fine. So would be making hourly into commissioned or salary. But making an employee an independent contractor and avoiding paying/benefitting them as an employee? That's only ok if the person is actually an independent contractor. You can find a good discussion of employee vs. independent contractor on the IRS website.


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