TOPIC 7 BUS 340
Benchmark Topic 7
Competency 4.1: 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.
In an additional 250-500 words, discuss the following from a Christian worldview perspective.
One ethical issue or dilemma the scenario presents for Madrid and Berne and strategies for addressing the issue or dilemma.
One ethical issue or dilemma the scenario presents for Joan Newman and strategies for addressing the issue or dilemma.
Submit the final 750-1,000 word analysis of the scenario to your instructor.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success, Center. An abstract is not required.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. Refer to the LopesWrite Technical Support articles for assistance.
Topic 7 Bus 340
Employment laws provide regulations and establish guidelines for the employers and the employees for the protection and development of a working structure. Such laws provide a foundation for the economic system. For the guidelines outlined by the law to be implemented, a business has to determine the nature of the relationship on whether those working are employees or independent contractors to avoid any legal repercussions. The discussion of the paper will focus on the ethical issues arising from employee designation based on the case study of Madrid and Berne.
Importance of Distinguishing between an Employee and Independent Contractors
Distinguishing between an employee and an independent contractor is crucial to setting of a professional working relationship and establishing the level of control. Independent contractors and employees have a unique set of working terms that should be honored by the business. One critical area that the distinction is critical is in filing business taxes as the employer is responsible for withholding employee’s taxes from their paycheck while they cannot do so for an independent contractor. Repercussions for wrong classification of workers are costly as they attract interests and penalties.
Key Factors for Determining Joan’s Employee Classification
According to the Internal Revenue Service, there is no specific number of factors that should be used to classify a worker, and there is no factor that stands alone since factors are dependent on the situation at hand (Internal Revenue Service, 2017). Rules by the Common Law outline three categories of classifying workers. They include behavioral, financial, and type of relationship. In the category of behavior, it is determined whether the business controls or whether it has the right to control the activities of the worker. The financial factor focuses on issues of payment and reimbursement of expenses and provision of working tools. The category of the type of relationship uses written contracts and other types of benefits entitled to the worker. All these factors must be considered in determining whether Joan is an employee or an independent contract. According to IRS, a business should consider the entire relationship, degree of control, and other relevant factors. Key factors in Joan’s case includes the contract signed by Joan, payment terms, tools for conducting business, location of operation, and the degree of control exercised by the business over Joan.
Joan’s Designation as an Independent Contractor
The ABC test is a major State regulation that determines the classification of a worker as an independent contractor. The test requires one to be free from the control of the hiring firm, perform work outside the scope of the hiring business, and be “customarily employed” in similar work they are hired to perform (Murray, 2019). Joan case can be analyzed using the ABC test utilized by state regulations. Joan’s activities are controlled by Madrid and Berne since they return work for corrections before handing over to the client, his work is within the scope of the hiring firm, but she has her own firm and can, therefore, be considered as “customarily employed.” A general rule by the IRS is that one is considered an independent contractor if the hiring business has the right to control only the results of the activities and not what or how it is done and if they are subjected to self-employment tax (Internal Revenue Service, 2017).
In the case of Joan, Madrid, and Berne supervises the work and controls how it is done. Using the three categories of controlled as outlined by Common Law rules, Joan’s designation as an independent contractor is incorrect. Although Joan is considered independent due to several factors, such as the existence of the contract signed as an independent contractor, working and receiving payment on a weekly basis, the fundamental factors for classification indicate that he is an employee. The issues include having an office in the payer’s office, being provided with working resources, the payer having control over his activities, while he has the freedom to interact with the customers and other employees, working solely on Madrid’s and Berne’s projects.