Let’s say, hypothetically, that I own a small business (and I’m doing well). I have a close friend or family member that is unable to work for whatever reason. Would it be legal for me to hire him (so that he could receive insurance benefits from my company’s group) to sit at home and watch TV?
TIA!
–FCOD
Sounds like he’s filling the position of “Advisor”.
Why would you think it wouldn’t be?
I believe it’s called an “entourage”. Google “MC Hammer” and “Memphis Mafia” for instance.
I don’t know…I thought that maybe the insurance company would care for some reason.
–FCOD
You’ll want to check in your own state, but what is required in California is that the person be working at least 30 hours per week (20 in some cases) on your payroll with tax witholdings so they receive a W2 and are covered by workers comp. As to what they are actually doing for that 30 hours a week, we really don’t care because we don’t ask.
Your contract with the insurance company will specify some definition of “employee.” The IRS will have some requirements about how employees are defined for the purposes of your company’s employee insurance plan being tax deductible. ERISA, the major law about employee benefits, may also have some required definitions of employee. Failure to meet any of those definitions in the arrangement will cause you legal problems. Also, meeting those definitions will probably cause your friend to be considered to be your employee for all other legal purposes. For example, you may need to provide Workers Compensation and Unemployment Insurance coverage.
Although IANAL, these are some reasons why doing what you suggest might cause legal problems. If you’re actually considering it, talk to a lawyer first.
Why would the insurance company care? Your business and your friend are going to be paying for the premium (and if he can’t work because he’s sick, you are going to be paying a lot).
Why would the insurance company care? They may not care if the person is actually doing any work, but they may care that the formalities of employment are in place. They don’t want to be a party to anything that the government might see as a tax scam, for one thing.
Also, although the employer/employee are paying the premium, the insurance company is paying the actual expenses. Although the insurance company can take high costs into account in the long run, they won’t want the hit when you onboard 20 pseudo-employees in need of heart transpants in one year. The insurance company does their actuarial work based on employees having some minimal level of health. They are pricing the policy based on an employee population, not some other criteria.
Another concern with this approach, although not specifically a legal one, is that if the pseudo-employee is very sick, it will increase premiums across the board for all employees. The tax-deductibility laws for employer insurance won’t let an employer charge different premiums based on claims history.
Because insurance companies often base their premiums (for small businesses) on the average age of the employees.
We employ two summer part timers every May when we are up for renewal. Two 18 year olds bring down our average a ton and we pay less despite their salary.
They do actually do stuff around the office/shop area though.
They have to work 30 hours and be covered by Workmans Comp.
I’m in Maryland.
It occurred to me after the edit window closed that this isn’t necessarily true. The employer could choose to bear the full cost of the increase in premiums rather than pass it on to the employees.
Writing the job description would be key.
Residential Media Researcher:
The encumbant willl be responsible for monitoring television, radio, print, and internet media for announcments, information and other material which will be of concerm to “Company Name”.
Skills include: Familiarity with current media forms, ability to work independantly (this is a “work at home” position), good memory and communication skills Encumbant may be required to log various information regarding type, content, time and format of material resulting from media monitoring.
…
IANAL, but
Frankly, its your business and your money, so if you want to hire someone to be a “bubble gum tester” its your choice. Just make sure you have jumped through all the appropriate hoops (legally speaking). Effectively, you will have to do all the same paperwork, administration and meet all pertinant employment legal requirements.
Regards
FML
PS - If your friend doesn’t want the job, I may be available… grin
From what I have seen in the workplace there is no chance that any regulatory agency other than supervisory personnel within the company would actually care what such an employee does.
Make sure you give him a job description.
Assign him the job of watching TV and wandering around as he sees fit to be on the lookout for anything that might affect the company.
Will you be posting the position on the SDMB?
FWIW, I’ve seen police departments do something similar. For instance, to teach at the Police Academy, an instructor must be a current law enforcement officer. There are a couple retired cops who are on the payroll at some small city departments for $1 per year just so they can teach at the academy.
I believe that idea is called a peppercorn wage.
I may be remembering this wrong, but I’m sure I read that Oakley Sunglasses hired Lance Armstrong when LA was sick with cancer. All of his sponsors had dropped him, and he was in danger of being jobless and sponsorless while being deathly ill in the hospital. They specifically hired him so that their health insurance would cover his illness. I guess his job consisted of lying in his hospital bed, getting well.
ETA: and LA’s cycling team, Cofidis, fired him when they discovered he had cancer.
Thanks, everyone, for your responses. It’s really just a hypothetical I was wondering about. I don’t even own my own business. I’m just a simple software engineer.
–FCOD