Can I Receive Overtime as a 1099 Contractor?


What Are My Rights As a 1099 Contractor with Overtime?

There is a certain freedom that comes with self-employment. Scheduling days off–if affordable–according to your own preferences; charging what you believe your own labor is worth; and enjoying the prestige that comes with operating your own business. Of course, there is always the flip side. A customer may need a job done on a holiday or weekend, for example. Alternatively, the economy tanks and you are left with more days off than your cashflow can endure. Then, there is the issue of overtime. As a wage earner, overtime pay was your due. As a vendor, however, there is no overtime.

You Are Not an Employee

There is a vast difference between working for self and doing so for others. Strictly speaking, “self-employed” is a misnomer. You are an independent contractor, a business owner. You might be incorporated as a C or S corp; a limited liability company; in a partnership of some kind; or simply a sole proprietor. Regardless of the legal entity under which you do business, you are not an employee if you are receiving a 1099 tax form from a client or customer. The 1099 means that you have sold a certain amount of goods and/or services to the other party, which has in turn recompensed you according to an agreed-upon price. A wage-earning employee, on the other hand, receives a W-2 form from his or her employer.

What Is the Difference Between 1099 and W-2 Recipients?

A side-by-side comparison of the two tax forms is telling. For one thing, there are no taxes withheld on the 1099 as with a W-2. Independent contractors are responsible for estimating their own annual tax burden and make quarterly payments based on that reckoning. The Internal Revenue Service makes another distinction between self-employed workers and conventional jobholders: both are responsible for contributing to Social Security and Medicare but contractors do so through the self-employment tax whereas standard wage earners have these funds deducted through the payroll tax. Depending on the duration of employment, the W-2 worker receives a single tax form from the payor; the 1099 contractor will get a form from each customer as long as the “miscellaneous income” from the client exceeds $600.

Is It Just a Matter of Tax Filing?

Other federal authorities distinguish between independent workers and employed individuals. The Fair Labor Standards Act (FLSA) law, which, among other things, sets the national minimum wage, also sheds light on the “employment relationship” that demarcates employer-employee from purchaser-vendor. Subject to numerous court battles, the law focuses over how much control the paying party has over the paid party’s performance. Other aspects judges examine is the exclusivity and longevity of the relationship and whether the worker is receiving benefits on par with other employees. Consequently, unless the sponsoring company is micromanaging the execution of tasks–or providing insurance or other non-monetary compensation–a 1099 contractor will have a difficult time obtaining the same treatment as a person on staff.

So No Overtime? Ever?

The old adage that “time is money” endures because it is true. However, that does not determine who owes that money. The FLSA mandates overtime pay when employees work in excess of 40 hours per week. Overtime for 1099 contractors, by contrast, is not codified by federal law–though individual states are not prevented from making such provisions. The best way, nevertheless, for the self-employed to receive overtime remittances is to formally request it when establishing each business relationship. Contractors make contracts and overtime can be a stipulation, provided the client agrees. Otherwise, consider the lost time in light of the many other advantages of self-employment.