Re: Transition from employee to consultant--any gotchas?

Subject: Re: Transition from employee to consultant--any gotchas?
From: TechComm Dood <techcommdood -at- gmail -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Wed, 25 Aug 2004 14:11:48 -0400

> My employer terminated me yesterday as part of a
> we-hope-we-can-still-hang-on-until-things-turn-around deperate last cut.

Sorry to hear that. :-(

> They have asked me to continue performing a subset of my former duties
> as a consultant, with the understanding that I'm going to look for a
> full-time job and may end up being barred from moonlighting for them if
> I get one.

Get the duties, responsibilities, and the "understanding" of job
hunting in writing.

> 1. They're giving me severance of a few weeks' pay, to be paid in
> biweekly instalments. My understanding is that this probably will
> prevent my collecting unemployment benefits until I've received the last
> installment. Not a problem. However, I don't think this prevents me from
> entering into a contract with the company effective today.

Severence does not prevent you from getting unemployment. Apply for
unemployment ASAP. Take it from me... I was laid off three times
within two years' time... You can certainly collect severence and
unemployment at the same time. However, if you are working for this
company, officially, as a contractor, as of today, well, then you
can't collect unemployment. ;-)

> 2. They're selling me, for a dollar, the old equipment and software
> licenses that were on loan to me at home so that I could telecommute.
> That way I'll own my production tools, helping me satisfy the IRS
> requirements for independent contractors. (The depreciated value is
> zero, so they make a profit at a dollar.)


> 3. So that I can effectively do the tasks they want me to do, they are
> leaving me connected to the company network through VPN and are leaving
> my email account on.

OK, that sounds normal for a consulting gig.

> 4. I am free to use the equipment I will now own (after they look up the
> serial number to ensure it's the company's to sell, not leased
> equipment) to sell my services to other companies, without restriction
> (and if you have any leads, hey, I ain't proud).


> 5. They will pay me a fixed retainer, billed in advance, for up to a
> certain number of hours of work per month and a (higher) hourly rate for
> any additional hours needed to complete projects. Numbers are TBD, as we
> haven't started negotiating yet.

That's a good approach.

> 6. Outside of routine tasks, which I will clock in aggregate and charge
> as total hours, any separate project assignment will be governed by a
> signed statement of work, with its own separate schedule, time
> estimates, and conditions of acceptance.

Sounds reasonable.

> 7. I'm retaining copyright of all works produced until the corresponding
> invoice is paid in full, and I'm retaining a perpetual license to use
> non-confidential works in my professional portfolio.

Definitely get their OK on the portfolio inclusions in writing. I
don't think the copyright thing will fly though. If they don't pay,
don't hand it over to them. But, if you hand it over to them and never
see payment, the copyright thing won't fly, I'll wager.

> So, folks, what have I overlooked? Do you think this will pass muster
> with the IRS regarding contractor status (I can cook up a business name
> if that helps)? Is there anything about the severance arrangement that
> would prohibit me from beginning immediately to do billable work?

All the IRS cares about are your correctly-completed tax forms. Think
of severence as a taxable gift; getting severence doesn't mean you can
do other things.

> I know you guys aren't lawyers (at least most of you aren't), and at
> some point I'll probably have to involve one. But if you have any
> suggestions for improving this plan before I present it to a lawyer, I'd
> like to hear them.

I've never had to use a lawyer.


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Transition from employee to consultant--any gotchas?: From: Dick Margulis

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