Define relevant laws and regulations that affect the business environment and how businesses operate.
The purpose of this assignment is to identify ethical issues associated with employee designations and to identify laws and federal regulations governing employment.
Review the Madrid and Berne scenario that you used as the basis for your Topic 6 discussion of the laws and federal regulations governing employment. Consider the ethical issues and dilemmas the scenario creates for Madrid and Berne and Joan Newman.
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 hired Joan Newman Business Services, with offices in Phoenix, Flagstaff, Tucson, and Yuma, to perform contract bookkeeping services for Madrid and Berne clients who requested and needed such services. Madrid and Berne entered into an independent contractor agreement with Joan Newman Business Services. The contract stated that Joan Newman is an independent contractor and agrees that her business is an independent contractor of Madrid and Berne.
After entering into the agreement, Joan worked solely on jobs assigned by Madrid and Berne and was paid a commission for the work. The commission was based upon 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 arrangement made it easier for clients to utilize Joan’s services and be familiar with the offices. Madrid and Berne reviewed Joan’s work and returned faulty work to her for corrections before delivering the completed work to the clients.
Consider and apply the feedback provided by your instructor regarding your discussion of the following in your Topic 6 assignment submission. Evidence of revision will be assessed and should be evident.
Provide an explanation of why it is important to know the distinctions between employees and independent contractors when operating a business.
Discuss the key factors for determining Joan’s employee classification using the concepts that have been presented so far in the course and your own research relevant to the scenario.
Using the rules for distinguishing between employee and independent contractor, discuss whether Joan’s designation as an independent contractor was correct, and justify your designation by citing laws and federal regulations.
Differences between Independent Contractors and Employees
Categorising workers either as independent contractors or employees has significant implications upon the benefits as well as costs that they are entitled to and the type of relationship that the employer has with the worker, among other things. The categorization can be considered in terms of the agreement that is signed between an employer and worker. The federal government has the obligation of regulating the categorization of workers by assessing the impacts the categorization has upon workers and, most crucially on federal taxes (Leberstein & Ruckelshaus, 2016).). Using a case study of a contract between Joan Newman Business services and Madrid and Berne, a top-rated accounting company, this paper aims at looking at the differences between independent contractors and employees.
According to the case scenario, Madrid and Berne Company hired Joan Newman to offer extra services to their clients. According to the contract that the two parties signed, Joan Newman was an independent contractor. Upon entering the contract, Joan solely worked on the jobs that Madrid and Berne assigned to her, receiving commissions for the same. The commission depended on the fees as were determined by Madrid and Berne along with the amounts paid to Madrid and Berne by clients. Joan used the unused and available space at Madrid and Berne’s offices and used Madrid and Berne’s supplies and equipment. This arrangement did make it easier for clients to use Joan’s services as well as get familiar with Madrid and Berne’s offices. Madrid and Berne did review Joan’s work and if there were faults, the work was returned to Joan for corrections before the same were delivered to clients.
To determine Joan’s classification, principles that differentiate independent contractors and employees are reviewed. The rules that guide the classification of workers are: (i) whether there is control in the way a worker does their job; (ii) whether a worker has control over loss or profit issues when working for their company; (iii) the kind of contract signed (whether the employee works for a fixed number of hours or at recurring intervals); the level of training offered by a company; and (iii) the benefits received by a worker or company (DeRoss, 2017). Leberstein and Ruckelshaus (2016) reason that independent contractors are at liberty to work for whomever and whenever they chose, usually have their own workplace and tools/equipment to accomplish their jobs. A company’s right to terminate an independent contractor and/or when an independent contractor wants to quit are fundamentally spelt out in the contract that was signed between the contracting company and the independent contractor (Leberstein & Ruckelshaus, 2016). An employee has the opportunity of quitting their job at any time, yet the individual contractor is bound by the agreement that they signed (DeRoss, 2017). For more information about the difference between independent contractors and employees, see figure 1 below.
Figure 1: Independent contractor vs. employee (Leberstein & Ruckelshaus, 2016).
Using the above rules, there are things standing out that can help us categorise Joan as an employee or independent contractor. The bookkeeping service that was to be offered by Joan was an additional one to Madrid and Berne’s clients. According to the agreement that was signed by the two, Joan was Madrid and Berne’s independent contractor. Similarly, Madrid and Berne hired Joan on strict terms of reference. Joan used the space that was available in Madrid and Berne’s offices and used their supplies as well even as Joan helped Madrid and Berne’s clients. By understanding that they were distinct entities, the businesses entered into an agreement, with the contract spelling out that Joan was independent contractor. According to DeRoss (2017), the two companies followed the IRS principles by putting their agreement in writing to assist in identifying if a company is an employee or independent contractor. Thus, I strongly believe that Joan is an independent contractor of Madrid and Berne Company.
From a Christian worldview perspective, there are ethical dilemmas that arise. To Madrid and Berne, the ethical dilemma is that they are at liberty to choose a commission that is unequal to the expectation of the industry. That is, they had the opportunity of choosing between a lower or decent commission for Joan’s work. To tackle this ethical issue, there is a need for the contract agreement to be concluded, which entails acceptance and offer of a contract. Joan can choose to accept the contract if she thinks that it is equal and fair. From the Christian perspective the metaphor of Joseph’s successful handling of the food crisis in Egypt can be related with this scenario.
Joan’s ethical dilemma lies in the fact that she can opt to work for Madrid and Berne or directly contact Madrid and Berne’s customers after working hours for Madrid and Berne at low costs. The strategy to tackle this is that Joan should state specifically that she will not work with Madrid and Berne’s clients during working hours in agreement terms. In the Bible’s Old Testament, God created animals, light, and the earth and all that is it. All these items are, thus, to be reasonably and equally used by people. God’s principle is the ethical standard for Eve and Adam. It is the ethical principle that Joan ought to follow the guidelines by Madrid and Berne in the same way. for generalizing the study’s findings.
DeRoss, J. (2017). Misclassification of Employees as Independent Contractors in Indiana: A State Legislative Solution. Indiana Law Review, 50(2), 673. DOI: 10.18060/4806.1150
Leberstein, S., & Ruckelshaus, C.K. (2016). Independent Contractor vs. Employee: Why independent contractor misclassification matters and what we can do to stop it. Contemporary Labour law, 1(1), 23-34.