Can an employee become a consultant?

Q. I have been working for the last 1/2 year for a small company. I was getting paid like most normal businesses, with taxes taken directly out of my paycheck. We have now moved to a new location and have a new Business name, and to save $, my boss wants to pay me as a "consultant" and pay me my gross salary, of which I will have to pay my own taxes. He is willing to cover the extra social security taxes that a "consultant" normally has to pay. However, every accountant I have talked to has said that this is a bad idea and besides losing $, I could get in trouble with the IRS. Also, I will get no unemployment insurance, health, etc if I am a consultant. At first he gave me a choice and once I chose to not be a consultant, because of all of these reasons, he changed his mind and he basically said that I can either quit or accept this. I want to know, is what he is doing illegal, and can I sue him?


A. Your boss is doing what a lot of companies are doing -- eliminating the cost of providing benefits by either downsizing or outsourcing. For instance, some companies hire long-term temps from an agency, rather than hire a secretary, so that the company doesn't have to provide benefits, or worry about personnel (HR) issues. With a temp, and with a consultant, if you don't like the work, or if you don't need the worker, you simply terminate them, or elect not to renew the contract.

It's perfectly legal to do this, by the way. Generally, the accountants are right that it's not necessarily a financially beneficial to be a consultant, but I don't think you'll get in trouble with the IRS if you set yourself up correctly. I could be wrong, so you'll want to sit down with an accountant or tax attorney you trust to explain the pros and cons to you.

It's not always a disadvantage to the employee who turns consultant if you know how to protect yourself. First, as a consultant, rather than an employee, you'll be considered "self-employed" by the IRS, and will get a 1099 at the end of the year, rather than a W-2. As a result, you'll have to pay self-employment taxes in addition to regular income taxes. That's just one of the many tax issues you'll face. You definitely want to consult with an accountant or a tax attorney to sort through the issues you'll be facing. However, you can offset these costs by increasing your hourly consultant's rate to your former employer. Lock everything down a nice tight contract, which you'll title "Consulting Agreement." Set out your hourly rate, the number of hours you work, and even the specific hours you'll work. Hey, if your former boss is giving you lemons, may as well make lemonade. For instance, if he wants a consultant, rather than an employee, then consult on your terms, at hours that are more convenient for you while still getting the job done for your client/former boss.

As for health benefits and such, you'll have to shop around for a company that provides them to self-employed individuals. They're out there; you've just go to find them.

By the way, technically, what your former boss has done is, in essence, fired you and then offered to retain you as a consultant (assuming he's paying you as a consultant now). If he's still paying you as an employee, and then terminates you because you won't agree to be a consultant, you may be entitled to unemployment benefits. I'm not suggesting that you should pursue this option; you can probably get a better deal with a good consulting agreement. However, if the former boss doesn't agree, you might consider exploring these issues with the State.

The other thing you can do, depending on the nature of your job, is to farm your talents out to a temp agency. You may be able to find a long term temp assignment as a .... well, whatever it is you do. Many temp agencies provide benefits after you've worked a certain number of hours for them, and temp work also gives you the opportunity to try on different kinds of office settings.

Good luck. You can make the best of a bad situation if you put your mind to it.

To Co-Habitate, or not to co-habitate....

Q. I have a question for you regarding Common Law Marriages....Here it goes.

I was involved with this man for 10 years. We lived together and had a wonderful live. We rented [together] and right after 9/11, he talked about buying a home. He said he thought we would have a better chance of getting the mortgage as my credit was bad many, many years back...He also said that his ex wife wouldn't be able to go after me for anything..He went thru a very ugly divorce right after we met.


I agreed to it as I always knew he would do right by me..Well in 2002, we bought the house. I contributed $1,200.00 each month towards the mortgage (excluding groceries, clothes, etc.)

Late last September right after I had back surgery he tells me he needs a break. He needs to know he can make it on his own...I could go on, but I'm sure you know the outcome.

Well, when I asked him to give me back what I put into the home for the last 2 years, he said NO, that it was his house and that he had contacted an attorney and I had no rights.

I moved out and left almost everything. When I tell you that, it's true..I left everything. I moved into an apartment. And here he is living large in this home which has now almost doubled in price.


I did contact an attorney . . . and he told me that I did not have any rights as common law is not considered legal in [my State]. He was a very nice and said I could spend thousands and thousands of dollars, but would lose. He asked, why I didn't sign a cohabitation agreement. I had never heard of it before.


I know nothing can be done, but I thought I'd ask anyway. [By the way], I think everyone should be made aware of this "cohabitation agreement."


A. I really hate these kind of situations because they are so unfair. It sounds as if you, in good faith, relied on a guy you thought you could rely on, but when he was done with you, he dumped you, without any consideration of your time together, the things you did for each other, or the things you did for him. Then, to add insult to injury, he acts like the last ten years was nothing more than a long date.

Unfortunately, that is the risk of getting heavily and deeply involved with someone without the benefit of marriage. With marriage, there are definite rules involved, and ways to divide property. This is not usually so with "live-in" relationships. However, some courts and some states have recognized the unfairness of the "live-in" situations after they end. A co-habitation agreement sounds like a good solution before the fact. For instances like yours that arise after the fact, I know that some states also recognize "palimony" suits. If I remember correctly, California first recognized that folks who lived together for a long period of time, and invested together in things like property, businesses, and stock, each have interests that should be recognized and divided between them once the relationship ends.

I do not know if your state recognizes palimony suits. However, I urge you to contact a family law attorney in your area and ask about a palimony suit, specifically. Make sure you give detail to the attorney when you explain the situation, because ten years is a long time to be living with someone, and investing in real estate, and leaving your personal belongings behind, for you to have to walk away with nothing. I suggest you consult with someone sooner, rather than later, because there may be a time period involved in bringing such an action, if they're recognized at all.

In addition, it's not entirely clear from your question who was on the deed, who was on the mortgage, and who was supposed to pay what to who. If there is some kind of writing to establish that you were paying $1,200 per month towards the mortgage (maybe you made a note on your checks that this was towards the mortgage?), and you paid something like $25,000 or $30,000 towards the mortgage over the past two years, you might be able to convince a judge that you have that much equity in the property and should get it out when the house is sold. This would involve a lawsuit in the equity (or chancery) division of the courts. Again, you'd have to find an attorney who would take the suit, but if someone would do it for a small retainer plus a percentage of your interest, it might be worth pursuing. Of course, you should consult with an attorney in your State about this issue before making any decisions. I could be all wrong under the law in your State, but it's certainly worth asking a question about.

Finally, if nothing else, if you left personal property in the house, and you can establish that it's yours (like photo albums with pictures of your parents, or your clothes, or other personal items that were clearly yours), you may be able to have that property returned to you. Of course, the more time that has gone by since you left the home, the less likely it is that the court will accept your claim about certain types of property, but that depends on the terms under which you left the home, and the property at issue. I mention it only because if you left family photos and heirlooms behind, you should be able to get them back.

Best of luck to you. I hope things work out.

What happens after The Repo Man leaves?

Q. My boyfriend was a manager in a small inventory co with a couple of cars in their fleet. The company went bankrupt. My boyfriend took over thepayments on his car and gave them the info to repossess the other car. The bank is now coming after him for the balance. We thought if the car was repossesed, that would be the end of it. Can you help?


A. Your question highlights the hazard of trying to answer something without having enough information. Don't get me wrong; I'm not asking you to elaborate. It's just that there are so many possibilities based on the few facts you gave me that there's no single correct answer I can give you. But let's take a shot with some general information.

Ordinarily, if you buy a car and finance it, you have to make monthly payments to the bank that lent you the money. You can usually miss one, or even two payments before the bank gets irritated. However, if you miss too many payments, the bank will send the repo man out to your house and he'll come and snag your car.

You should understand that repossession is usually a remedy of last resort because, really, what is the bank going to do with your car? The bank doesn't drive, and its employees have their own cars. The bank would much rather have you making regular payments because that's how the bank makes its money. But, the bank isn't going to let you slide forever, which is why it has repo men to contact.

Once the repo man gets the car from you, you usually don't have to make any more payments to the bank for any upcoming payments. However, you do owe the bank for payments that you missed. Why? Well, you signed a contract saying you'd make them, and banks are notorious for enforcing those types of agreements. So the bank will come after you for those payments. In addition, after the bank gets the car back from the repo man, it will auction it off. If the bank doesn't get enough money from the sale of the car to pay off your loan, the bank will come after you for the difference between what the car sold for at auction and what you still owed to the bank. This, too, is usually spelled out in the financing agreement with the bank. So, whatever payments you missed, plus the difference between the sale price and the loan balance, equals the amount you would owe the bank. (That number could be negotiated if you could come up with a lump sum -- maybe the equivalent to 50 cents on the dollar -- that the bank would be willing to accept.)

How does all of that apply to your boyfriend's business? Well, that all depends on his involvement with the business. Was he simply an employee, or was he a part owner? Was the vehicle in his name, or in the company's name? Was the company a corporation, a partnership, or a sole proprietorship? If he was simply an employee, with no involvement in the repossessed vehicle except that he got to drive it as a company car, it's unlikely that the bank could legally pursue him personally for any balance due on the car. Of course, the bank would then be entitled to possession of both cars, including the one your boyfriend is driving. If, on the other hand, your boyfriend was a part owner of the company, or otherwise signed some sort of agreement under which he's personally liable for payments on both cars, then he's liable for missed payments and any shortages after the auction, as I explained above.

Your boyfriend should consider consulting an attorney to review all of the paperwork involved here, especially with the mixed bag of bankruptcy law, the repossession, and the bank's attempts to pursue your boyfriend personally.

Best of luck.

Can I get off that deed and mortgage?

Q. My boyfriend is divorced and part of his divorce decree states that he has no financial obligation with regards to the house he and his ex-wife purchases will they were married.

The problem is his name is still on the deed and more importantly the mortgage. It's a big problem because now he's trying to get a mortgage to buy a house and he's having a hard time getting approved because his credit report shows that he's already has a $200K mortgage. Is there anything he can do to get his name off that mortgage? His ex-wife has been saying she's going to sell or refinance and get his name off of it for 3 years now and she still hasn't. What can he do?


A. This is one of those potentially ugly family law situations. I say "potentially," because it can be rationally and reasonably worked out, if everyone cooperates. I obviously don't know your boyfriend, or his ex, so you'll have to make the call with respect to how cooperative everyone will be. (Since the ex has not taken any action to resolve this for the past three years, I'm guessing that "cooperative" is not the adjective you'd use to describe her. But I digress.)

There are two separate issues here: the name on the deed is one; the name on the mortgage is the other. The deed question is not particularly complicated, and actually, it might have been covered in the final divorce decree. Often, if one party is no longer obligated to make payments on a house, and is not entitled to live there, the Court may order that the party retaining the property obtain a "new" deed, in his (or her) name only. Obtaining and recording (which means filing it with the County) a new deed is relatively straightforward, but your boyfriend should definitely consult with an attorney (presumably his divorce attorney) to sort through the details and to review his divorce decree in order to find out exactly what it says with respect to the property. (This is especially important in light of the fact that it appears that your boyfriend apparently has no obligations to contribute to the mortgage payments.)

The mortgage question is a little more complicated because your boyfriend and his ex are party a contract with the bank. That's what the mortgage, promissory note, and various other papers all amount to, and banks are usually pretty insistent on parties living up to their obligations under such contracts. They generally don't simply release a party from the contract because of a divorce, a business deal gone bad, or most any other excuse you might conjure up. (You can always ask; I'm just assuming that the present mortgage holder is not going to discharge your boyfriend's obligations under the present mortgage simply because he asks.)

One solution is pretty simply. Your boyfriend's ex, if she's reasonable, could agree to refinance the mortgage on the house on her own. She would then pay off the existing mortgage and obtain a discharge of that mortgage from that Bank. In that way, your boyfriend is off the hook.

If that doesn't look like it's going to work (or if there's heel-dragging), your boyfriend could file a motion with the Court to request relief. That takes time and money, but if that existing mortgage is preventing him from getting another mortgage on his own, he may have to go that way.

Given everything that's going on, I strongly recommend that your boyfriend sit down with his divorce attorney, or another attorney of his choosing, and get some good solid legal advice, especially if it looks like he'll have to ask a judge for relief.

By the way, here's an earlier question involving mortgages and deeds from someone else. You might find it interesting, if nothing else.


Best of luck.

My kingdom for a drivers' license

Q. I have a question about my boyfriends driver's license. It has been suspended for a long time now due to unpaid tickets. How do you go about getting it back?


A. As in most cases, each state is different, so you'll want to check with your State's Department of Motor Vehicles (or its equivalent).
However, here's a general overview of what your boyfriend will probably have to do.

First, if the suspension is only because of unpaid tickets, he'll have to pay all of the tickets off, plus any court costs and fees that may be associated with them. The State isn't going to reinstate a license if fees are unpaid. If the suspension is the result of a court's sentence arising out of unpaid tickets, your boyfriend may have to go to that court as well to show proof of payment.

Second, the State will probably charge a reinstatement fee. That's exactly what it sounds like. Your boyfriend has to pay an extra fee for the state to re-activate is license. I know; that stinks, but that's the way they do things.

Third, I believe that some state's require either re-testing or a driver's education class before reinstating. Your boyfriend should check on these requirements when he contacts the DMV.

As you can see, it can be a complicated and expensive process. That's because the state's mantra is "Driving is a privilege, not a right." The state will make you pay for that privilege, which is why its best not to get any tickets at all.

Good luck. I hope things work out for your boyfriend.

Happy New Year! Now, back to work...

Greetings, all, and thanks for checking in, as always. Hope the New Year has been treating you well.

As you can see, it's been a bit of time since I've updated here. The reasons are explained here, in my Musings and Observations. However, I'm back now, and better than ever, so it's time to get cracking with some more answers to your questions.

By the way, I want to thank Rocky Allen (and Blain Ensley, of course), who do afternoon drive on WPLJ in New York City. With their return to New York, they've revived the Ask A Lawyer segment on the show, and, as a result, I've got a whole bunch of new folks sending me their questions. I love doing this, so I'm happy to have the added traffic.

I want to remind everyone to read the rules before sending me their questions, just so we're on the same page. But then, feel free to email away, to askalawyer@email.com

Just one more thing. I've already gotten a few questions like this: "Can I sue (x) because (y) happened?" The answer to that question is always "yes, but." See, you can always sue someone. The question the person is really asking is, "Am I gonna score big bucks by suing?" In the vast majority of cases, that answer is usually no. The fact that you received the wrong order at your favorite restaurant, or you purchased an expired package of food from the store, or the cleaners shrunk your favorite shirt, or the neighbor's apples are dropping over the fence onto your yard, are all things that are technically claims you could assert, but why bother? In each of these cases, you would have to prove damages, and in each of these cases, the damages you could assert would be so minimal, it simply isn't worth talking about. I mean, really, how much damage did you suffer by having your shirt shrunk (even if it is your favorite)? Rather than sue, why not ask the cleaner to reimburse you the cost of the shirt? Really, just ask. You'd be surprised how often that works.

And, by the way, the "I want to prove a point," or "I want to send a message" as a justification for these nuisance law suits doesn't fly with me. Color me jaded, but I've seen too many folks fold up their tents as soon as they get the first four figure offer from an insurance company to believe the "send a message" claim anymore. You send a message by writing letters, organizing boycotts of services, hugging a tree, or giving your business to a competitor.

All that being said, I'll do my best to answer your questions, steer you in the right direction, and keep this spot as interesting and entertaining as possible.

Enjoy.