Giving a 1099 to This Teenage Worker Was Illegal

A few years ago, my then 16-yr-old niece received a Form 1099 from a dentist office where she had been a nighttime cleaner. Knowing what I do about HR, I asked the accountant who had sent her the 1099 about the questionable practice of “hiring” teenagers and then paying them as independent contractors.

These are actual responses from that conversation.

“This is common practice throughout the industry.”

My motherly instinct wanted to say, “Two wrongs don’t make a right.”

The IRS has established three categories of common law rules that define whether a worker is an independent contractor or an employee:

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does their job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

These categories are meant to determine who holds the most control: the company or the worker? The more control the company has, the more likely the worker is an employee; the more the worker controls, the more likely they are an independent contractor.

One reason the accountant insisted that my niece was legitimately paid as a contractor is because she had a key and was coming in after hours to fit her school schedule. (But let’s be honest --- she wasn’t able to come in right after school because the dentist office was still open until 5:00 p.m.) However, the argument that an employee has autonomy to complete the tasks at hand isn’t a strong enough case in and of itself, especially when the “flexibility” is to come in every night after hours, five nights a week.

She had also been instructed on what to clean, how to clean it, and used materials provided by the dentist office to do the cleaning. Why? Because she wasn’t a professional office cleaner with her own tools who traveled from site to site to do nighttime cleaning. She worked for this one and only dentist office, making it an even stronger case for employment.

But perhaps the biggest red flag was that she tracked her hours and was paid on a biweekly basis for the hours she worked. This is hands-down an employment situation, as independent contractors are paid by the job or project.

“She signed a contract acknowledging her status as a contractor.”

First of all, she’s 16 years old and new to the workforce. If you tell her to sign something, she’s going to do it because she doesn’t know any better. She trusts that you, the employer, are doing things legally.

One of the weakest arguments for being an independent contractor (and one of the easiest ways to prove that an employer is skirting the law) is by making workers sign something. Employers are expected to know and abide by all employment laws --- and if this is overwhelming to you, consider outsourcing your HR.

“Cleaning is not a key aspect to our business.”

While this may have been his only valid point, it’s not enough to overpower the other factors that determine control. In response, the question to this accountant was, “Can your office do its work without it first being cleaned?” If not, you either need to hire an employee to come clean or outsource the cleaning to a janitorial company.

Key Takeaway

Many employers get stuck mimicking the business practices of comparable businesses simply because “that’s the way it’s always been done.” But just because they’ve gotten away with it (i.e. they haven’t been sued yet) doesn’t mean it’s good business practice. Do your due diligence and learn whether your operations are within the law or contact an HR outsourcing company to conduct a free assessment.