Can We Ask an Executive Who Has Been Laid Off to Continue Working as a Part-time Consultant?
This arrangement can work if properly structured and if the actual circumstances meet the requirements of the law. In the current economy, some employers have found that they need to trim their workforce while retaining the services of knowledgeable executives. The parties often look to the concept of the “business consultant” as the model for their arrangement. This would involve entering into an agreement with the individual that their employment would end, but that they would continue to perform the same or similar services on a part-time basis, but with no insurance, no paid time off, or other benefits. Payments to the consultant would not be subject to the usual withholding and would be documented through a 1099 form as “miscellaneous income” rather than a W-2 form. But many employers do not realize that the company and the consultant cannot just agree to this arrangement. The consultant must be an independent contractor meeting the standards for that classification under federal
