Employee to subcontractor

[AKTS]

Hi all! Just trying to get some advice. My husband has a small business, him and 2 employees. We carry liability insurance and workmens comp, we have commercial insurance on our dump truck and chipper, pay the proper taxes and unemployment. We laid them both off for the winter and strarted back to work about a month ago.
Question is this: one of our guys decided he would rather be subcontractor than employee. He bought his chainsaws, climbing equipment (spikes, saddle, ropes), and backpack blower, rakes, etc. He bought a dump truck (has commercial insurance on it), just supplied us with a certificate of general liability insurance equal to what we carry and provided us with a letter of resignation. He is now no longer our employee. Can we now sub out jobs to him?
My husband really likes working with him, he trained him, and this guy knows how he likes jobs done. My husband is very picky, and won't leave a job he can't sign his name to proudly. And this guy wants to work with my husband, but wants his own start, too. We have no problem with him being a competitor as long as he is not competing on sites he is working on either with my husband or that he gives to him completely. Can this be done? He wants to sub out rigging, cleanups and hauling when they work on a site together. If it is a job this guy can do on his own, my husband would like to sub out the full removal and cleanup. My husband is looking to venture mostly into pruning of trees, since he just got his certification.
I know he cannot tell him how to do a job, just the end result, but it should work just fine, since he worked with my husband for 2 years and knows how he likes things done and what he expects.
Does anyone think this will be problematic? Or are we safe legally and taxwise to sub out to him?


ETA:This is not a ploy to not pay taxes or comp, we have done that for 2 years with him and still do on the other guy. He chose to starts his own tree business, but we want to be affiliated is all.

 

[kevknep]

Hi all! Just trying to get some advice. My husband has a small business, him and 2 employees. We carry liability insurance and workmens comp, we have commercial insurance on our dump truck and chipper, pay the proper taxes and unemployment. We laid them both off for the winter and strarted back to work about a month ago.
Question is this: one of our guys decided he would rather be subcontractor than employee. He bought his chainsaws, climbing equipment (spikes, saddle, ropes), and backpack blower, rakes, etc. He bought a dump truck (has commercial insurance on it), just supplied us with a certificate of general liability insurance equal to what we carry and provided us with a letter of resignation. He is now no longer our employee. Can we now sub out jobs to him?
My husband really likes working with him, he trained him, and this guy knows how he likes jobs done. My husband is very picky, and won't leave a job he can't sign his name to proudly. And this guy wants to work with my husband, but wants his own start, too. We have no problem with him being a competitor as long as he is not competing on sites he is working on either with my husband or that he gives to him completely. Can this be done? He wants to sub out rigging, cleanups and hauling when they work on a site together. If it is a job this guy can do on his own, my husband would like to sub out the full removal and cleanup. My husband is looking to venture mostly into pruning of trees, since he just got his certification.
I know he cannot tell him how to do a job, just the end result, but it should work just fine, since he worked with my husband for 2 years and knows how he likes things done and what he expects.
Does anyone think this will be problematic? Or are we safe legally and taxwise to sub out to him?


ETA:This is not a ploy to not pay taxes or comp, we have done that for 2 years with him and still do on the other guy. He chose to starts his own tree business, but we want to be affiliated is all.

Doesn't sound like it should be a problem at all. He set up his own business and pays his own insurance, so he should be a business just like you. I see the very thing you just describe happen in the government sector all of the time. An employee for a big contractor quits and starts a small startup up, and the big contractor subs out work to the new business.

 

[Climb020]

I do something similiar with a few guys. I have worked with them for a few years and then went on my own as a sub. Though I know I have the right to do the job as I see fit I still like to talk with both the customer and the guy hiring me about different ways to go about. No use in starting a ripple and getting a big head.
As long as you trust him to fly straight and not bite off too much you 2 should be fine.

 

[B-Edwards]

You might want to talk to a lawyer to make sure. I think you are ultimately responsible for anyone working for you or subbing to you.So if he gets hurt it might be possible that he would sue you (I promise someone will tell him he should) I may be wrong but ask a lawyer and know for sure.

 

[M.D. Vaden]

You might want to talk to a lawyer to make sure. I think you are ultimately responsible for anyone working for you or subbing to you.So if he gets hurt it might be possible that he would sue you (I promise someone will tell him he should) I may be wrong but ask a lawyer and know for sure.

Might not hurt to learn some facts, but I was thinking that the entire nation practically gets built with contractors and sub- contractors and it rarely stops the contracting world from moving along.

Why any different with trees?

In Oregon, it could make a difference, but only involving landscaping.

Landscapers can hiire a sub for tree work if the landscaper is licensed withe the landscape board.

But a tree service - if licensed with the contractors board instead - cannot sub landscaping to a landscaper.

Landscapers licensed for "irrigation" and backflow, can sub planting to other landscapers licensed in "all phases" or "standard" which is everything other than irrigation.

Landscapers can contract decks, but I don't think they can sub that part to a CCB construction board licensee yet - although last I heard, the boards were working toward a 50,000 limit for landscapers to sub to contractors.

 

[joesawer]

I do something very similar to what you are describing for several different companies. There is a check list that the IRS uses to see if some one is a sub or an employ. The state of CA has a seperate and more difficult check list.
Basically if he has his own business license, insurance, and tools and meets contract agreements rather than being an employee, I think that there is not much anyone can say, this is still America.
As for liability, If he messes up you will probably get sued if he is an employ or a contractor. If he is a sub with his own insurance you will have a layer of protection. If he gets hurt he might sue you and he might not, It depends on him as a person. As a rule most self employed people are not looking to sue their contractors.
Make sure your GL is in effect if you use subs. They usually are ok with subs as long as they are listed as additionally insured.
You might want to recommend that he get a health insurance plan that does not specifically exclude work related injury.

 

[AKTS]

thank you all for the info so far. very helpful. I will speak to our attorney about it as well.
I know his GL coverage allows him to sub from us, we use the same insurance agent and she verified for us that his coverage is equal to ours and that our insurance company accepts his certificate of coverage.
From all the research I have done, we are not required to be licensed in the state of PA. If anyone knows otherwise, please let me know that ASAP!!
We have a tax license for the business from the city, but again no 'tree worker' license is required. We only got our tax license from the city after the 1st year we filed taxes as a business, so he would not have that at this point, though I have recommended to him to obtain a TIN rather than use his social, because of fraud and if down the road he wants to hire employees of his own, he will need it. Plus I recommeded he sign up for accounts with Federal state and local tax agencies even though he will be filing zero on his quarterlies, it is good to have the accounts prepared in case he needs them.
The guy lives in a different city, so he needs to check with his town to see.
His failure to be sure he files proper paperwork for himself, is his issue, just meaning as long as we have the necessary documents from him that are required by law for us to obtain, we can't be held responsible for his failure to comply with anything for his own business,