Why should consumers in the market for dog-walking, cat visits, and in-home sitting care whether the company they hire is a W2 employer?
The IRS has a test for whether a relationship between (a) the person doing the work and (b) the company hired by the consumer to get that work done is eligible to be classified
as an “independent contractor” relationship (commonly known as “1099” based on the
name of the form used for tax reporting purposes). If the relationship is ineligible for 1099 classification, then the relationship is one of employer-employee (known as W2, based on the tax form). Meaning, in essence, that there is no such thing as a “1099 employee.”
Using this test, the IRS determines the status of a relationship between the party hired to
perform the work (the company) and the party actually performing the work (either
independent contractor or employee). This test is commonly called “The IRS 20 Factor Test.” However, the actual determination form used is the SS-8, contains 57 questions.
Most businesses and lawyers focus on the 20 most important aspects of
the test. The IRS advises that no one factor is necessarily the deciding factor, but one
factor can be the deciding factor (and has been in previous determinations).
The most important twenty aspects of the test are as follows:
- Level of instruction
- Amount of training
- Degree of business integration
- Extent of personal services
- Control of assistants
- Continuity of relationship
- Flexibility of schedule
- Demands for fulltime work
- Need for onsite services
- Sequence of work
- Requirements of reports
- Method of payment
- Payment of business or travel expenses
- Provision of tools and materials
- Investment in facilities
- Realization of profit or loss
- Work for multiple companies
- Availability to public
- Control over discharge
- Right to termination
Of these twenty aspects, those emphasized are the 13 tests on which it’s been determined that our industry fails to qualify for 1099 classification.
A) The company cannot direct when, where, or how work is done. In other words, on the client’s schedule, at the client’s home, and in the way the client has instructed.
B) They cannot train the person performing the work or integrate them into the software systems used for scheduling.
C) The company cannot specify who performs the work, so an independent contractor could subcontract your dog walks, cat visits, or in-home sitting to someone else.
D) The company cannot provide office staff to assist the independent contractor or control the hours or days of week that they do work on their behalf.
E) The cannot cannot have an ongoing relationship with the same independent contractor to perform the same duties at the same location.
F) The company cannot demand a full-time commitment from the independent contractor
G) The company cannot specify the order or sequence in which an independent contractor
will perform the assigned work
H) The company cannot require regular written or oral reports from the independent
contractor, meaning they cannot require them to leave a report of the walk or visit went.
I) The company cannot provide work materials, such as poop bags, to an independent
J) The company cannot require the independent contractor will work exclusively for them
so as to avoid double-bookings and ensure scheduling availability and does not have a right to “fire” or otherwise terminate an independent contractor outside of a contract specific to an individual project if an issue were to arise that would warrant termination
For all of the above reasons, the IRS and multiple state departments of revenue have
determined that dog walkers, pet care specialists, pet sitters, etc. are not 1099 eligible and that it is fraudulent and punishable by law to misclassify them as such.
This is why is so important for consumers looking for in-home pet care services to insist upon W2 employees exclusively to ensure that their Pet Care Specialist is trained by the company in proper procedures pertaining to their pet’s care and safety of their home, that their schedules are adhered to, that visit notes are created, and that the team member(s) performing the work are consistent, as it’s very important to establish a routine for the pets!
What this means for clients is that W2 employers carry general liability insurance that covers everything done while on the job by their employees. This general liability insurance extends to the client’s home and to the pets. They also carry workers compensation insurance, so that if a W2 employee slips and falls in a client’s home, that is covered by the company’s insurance. If a 1099 contractor slips and falls in client’s home, the client is exposed to 100% of the liability not covered by their homeowner’s insurance policy.
This insurance also extends to the pet. For example, if a client’s dog bites another dog or a person, a W2 employer’s general liability policy will cover the claim. If either of these things happen while a dog is being walked by a 1099 contractor, the client is exposed to 100% of the liability for these damages. Most homeowner’s policies will not cover these events if they occur outside on the home.
W2 employers also carry surety bonding on all employees and perform federal and state background checks on all personnel that allow them real-time updates for any change-in-status of 100% of their employees, allowing clients a greater peace of mind.