A common misconception in the construction business is whether the person you have working for you should be classified as a subcontractor or as an employee. This issue can, and has, had many competent business owners in messy lawsuits, all because of this label and the requisites that come with it. Fortunately, Karalynn’s next guest, Construction Attorney Kelly Stamy, is as experienced as they come on the matter and can make this discrepancy as understandable as possible for our listeners. In today’s episode, she and Karalynn work together to spell it out and make this potential business bumble a non-issue.
As she often does, Karalynn has Kelly begin at the start of her Employment Law career to kick off the episode. Kelly’s first run-in with employment law was certainly a notable one. She recalls, “It was a unique case. It’s a one where a lot of people’s ears perk up when I talk about it, but I represented about 20 strippers in a wage and overtime lawsuit.” Though atypical, the case was the perfect introduction.
“We had a stripper call our office and say that she was fired unfairly, and we have a script in our old office where we would ask every person who called, how were you paid? How many hours did you work? Because we would try to sniff these cases out. We found out that she was only paid tips, and our senior associate at the time did a quick Google search and found that across the country and every federal circuit and almost every state, they were deemed to be employees owed minimum wage and overtime...The first hurdle was truly establishing that they were employees and not independent contractors. It was through that fight that I learned the most about these kinds of issues.”
From this point, Kelly’s interest and experience with employment only grew, eventually landing her in her current position as a Senior Associate Attorney at Karalynn’s construction law firm, The Cromeens Law Firm, where she oversees almost all employment law matters. Her understanding of the nuances between subcontractors and employees has become especially pertinent and is what she goes on to detail. Stamy details that whether the individual you have employed is a subcontractor or an employee is not actually up to you but is decided by the government based on five primary factors, “degree of control, permanency of relationship, skills, initiative, the extent of investment, and ability to control profit and loss.” Based on these metrics, the classification will be made for you.
While the act of classification itself may seem relatively straightforward depending on the metrics specified by your state, there is still room for danger. Kelly mentions that, while there is a guideline for classifying, a problem she frequently sees is business owners wanting to misclassify for convenience, financial advantage, or other similar reasons, and that is the primary issue. Misclassifying employees can result in extensive repercussions for business owners that can impact their success or even shut it down entirely. Kelly stresses business owners must take the time and care to classify their employees properly. Doing so will protect the business from severe legal fallout on the other side.
Kelly dives further into the topic in this episode, so if you need clarification regarding your employees, subcontractors, or all of the above, you do not want to miss Episode 9: Subcontractor or Employee? (With Kelly Stamy). This information can make or break your business, so listen in. The Quit Getting Screwed podcast features incredible industry-affiliated professionals, and their most integral advice to help you run a better business. If you want more information about what we do, or a full transcript of the episode, you can visit thecromeenslawfirm.com. We’re also on Facebook, LinkedIn, and Instagram, and the book is available on Amazon.