Responsible Charge and Independent Contractors

[phamENG]

Background up front: small structural engineering firm providing design and consultation services to the public.

I'm in the market for an engineer to help out with my firm, and I've found one (yay!). His needs match mine pretty closely, and I know he'll be a good fit as we've known each other for several years. Interestingly, he has requested to be classified as an independent contractor (he has experience doing this as he has freelanced in the construction industry before). So, I started looking over employment classification rules to make sure everything is above board, and I found this interesting conundrum:

"Responsible charge" means the direct control and supervision of the practice of architecture, professional engineering, landscape architecture, or land surveying.

You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

Is it just me, or does the IRS definition of independent contractor (or, more accurately, the definition of what it is not) preclude the use of an "independent contractor" as an engineer? Because if I don't like the way he's performing an analysis or arriving at a conclusion, I have the right (and responsibility as EOR) to make him change it. It's not just the end result I'm looking for, it's consistency and accuracy in the process as well. What are other's thoughts and experiences?

 

[kipfoot]

You could fill out Form SS-8, unless you follow the tenet of "don't ask a question you don't want the answer for."

I think the IRS and labor laws in general tend toward viewing regular employees as employees. It may be a question of whether the tasks of the 1099 contractor are distinct, but with any 1099 contractor, you can set directives and specifications, in my opinion.

If you hire a wedding photographer and tell them, "I want this shot on a Hasselblad on black and white medium format film and printed on archival paper," that doesn't make them an employee. If you tell the engineer, "I need you to design this retaining wall using 60 pcf equivalent fluid pressure and a FS of two" I'd say that could be 1099 territory if it's a one-off. If they're doing 30 hours a week as part of your regular work flow, I'd say employee.

In general, I'd guess that what you need falls more into employee territory and our dear Commonwealth would expect you to withhold taxes.

I don't have experience hiring 1099 contractors. When I've hired people, even part time, they were employees. I do have experience from my very early years working for engineers through a 1099, though I clearly should have been an employee, under the law.

 

[phamENG]

Thanks, kipfoot. I can't imagine a better person to provide a more relevant response. I'll stick to employee status, I think.

In general, though - anyone out there hire 1099 engineers for your design firm? How do you square it with what I posted above? Curious to hear what others are doing.

 

[IRstuff]

It can be done, but if you are sealing his work, then no.

Independent contractors are ostensibly "independent," being able to set their own hours, blah, blah, and their work ostensibly is engineering piecework, i.e., you give an assignment and they go away and come back with a finished product.

The second IRS quote has to be nuanced; the "how" is possibly a gray area if the issue is quality and verisimilitude of the finished product. You might consider how your typical subcontractors are treated, compared with this guy.

TTFN (ta ta for now)
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[dig1]

There is a Administrator's Interpretation No. 2015-1 - BLR which helps clarify or perhaps muddy the situation

https://www.blr.com/html_email/ai2015-1.pdf

Typically if we hire a 1099 person (typically out-sourced drafting of red lines) they work for multiple clients, tell us when they are available, if they want to do the work, have their own computers, software, etc. It is also not frequent (1-2 days a month) as these people have their own clients and we sometimes have to adjust our schedules to meet their schedule. With drafting it tends to be the end result and how the person gets there isn't necessarily important. Engineering is likely different, especially if you are sealing their work; if they are sealing their own work they are in charge of it. For engineering I typically hire another licensed engineer to perform an independent check when necessary.

Some States have additional requirements which may be more restrictive.

 

[phamENG]

Thanks, IRstuff and dig1.

IRstuff - your first description is the desire, but I know it won't happen; at least not at first. So it disqualifies this circumstance right off.

dig1 - thanks for bringing up and making the comparison to drafting. I 1099 drafting occasionally, but it's not a person it's a company. This is my first foray into a potential 1099 with an individual, which prompted my deeper dive on what the difference is.

Thank you all for participating in building my confirmation bias! Any dissenters out there?

 

[IRstuff]

My wife does 1099 contract work as a physician, but it's kind of in a neither here nor there kind of space. I suppose if the IRS was given the hint, they might sic themselves on the company.

TTFN (ta ta for now)
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[BrentG]

My father ran a one-man consulting shop for a few years. His accountant recommended/required working for more than one firm in order to be considered a "contractor" rather than an "employee". My father also had to provide his own laptop, etc.