Home>Levelset Community>Legal Help>if a General Contractor pays you with a 1099...and submitted a year end 1099...and..the GC did not without...or pay any taxes on my behalf...are there any circumstances that then the GC can turn around and argue that I was in fact his employee.

if a General Contractor pays you with a 1099...and submitted a year end 1099...and..the GC did not without...or pay any taxes on my behalf...are there any circumstances that then the GC can turn around and argue that I was in fact his employee.

The GC in question has failed to make payment to me for almost 4 months now...I files a pre-lim notice of non-payment...then...filed a mechanics lien to hopefully secure my lien position. (GC,s has responded that I have no lien right position in Tennessee because the GC is asserting that I was an employee.) I have reviewed the IRS standards thoroughly and its seems very clear to me that if the GC did not treat me as an employee while working on his behalf...and ...that e paid $0.00 into the system on my behalf that there is no way that he can now truthfully assert otherwise. Finally, I had to write a very big check to "Uncle Sam" this year because I only had 1099 Income status. (The GC should not be able to benefit both ways!)

1 reply

Jul 5, 2019

That's a great question, and I'm sorry to hear you've had payment trouble here. Like you'd mentioned - a GC shouldn't be able to have it both ways!

Now, it's important to note that Tennessee does not utilize the same test that the IRS does to determine whether someone is an independent contractor or an employee - at least not yet. Come January 1, 2020 - Tennesee will use the same rules as the IRS. But, until then, Tennessee uses these seven factors to determine whether someone is an employee or an independent contractor: (1) the right to control how work is peformed; (2) the right of termination; (3) the method of payment (including whether payment is made via payroll); (4) the freedom to select and hire your own helpers; (5) who is furnishing tools and equipment, and how those are handled and managed; (6) how working hours are determined and who's deciding when work will or must be done; and (7) the freedom to provide work or services to other companies.

Depending on how many of those factors point in one direction or another, and on the strength that the factors indicate how the individual should be classified, that person may be considered either an employee or an independent contractor. And, and documentation proving one way or another will be really helpful if this dispute ends up in court or otherwise under official review.

Finally, it's also worth noting that even if considered an employee of a contractor, a claimant may still be entitled to file a mechanics lien. Under § 66-11-203 of the Tennessee mechanics lien statute, "every person contracted with or employed to work on the buildings or to furnish materials for the same with the above-named contractor shall have a lien on the property for that person’s work or material..." (though, lien rights likely wouldn't exist for employees of a contractor for residential projects). For more background on Tennessee's lien laws, this is a great resource: Tennessee Mechanics Lien Overview and Statutes.

Finally, even if a mechanics lien won't work to get paid here, keep in mind that there are always other options for compelling payment. By sending a payment demand letter along with specific legal threats (like breach of contract, a claim under Tennessee's prompt payment laws, or under some other theory), a claimant might be able to speed up payment. And, if that's ineffective, actually pursuing those claims via litigation might be an option. For smaller disputes ($25,000 or less), small claims court might be an option to expedite the recovery process and to keep legal costs low.

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