How can a San Diego employer avoid the expense of employee misclassification as a result of changes in laws applying to independent contractors? What are the new laws, and how does that effect present independent contractor relationships? A recent landmark case in the US Supreme Court has fundamentally changed the legal definition of an independent contractor, providing federal and state agencies with the tools necessary to declare misclassification of employees leading to significant liabilities and civil penalties, back pay, overtime payments, as well as back taxes, FICA, unemployment and workers compensation payments.
The costs to a San Diego employer can be staggering. The process is usually triggered by the IRS, the US Department of Labor, the California Labor Board or a “status audit” conducted by the California EDD. The nature of the relationship between your company and independent contractors will be questioned, and these agencies are relentlessly pursuing new sources of revenues at the expense of your bottom line profit.
What has changed? The California Supreme Court Dynamex decision established new guidelines for reviewing the financial relationship between the company providing the work and the independent contractor. If the independent contractor receives more than 60% of their income from a single source (your company) or provides services or support to your core business function you are going to face misclassification allegations and an uphill battle. Furthermore, the length of the relationship between your independent contractors and your company can impact this designation. The longer the term of an independent contractor’s work, the higher the likelihood that that worker is actually going to be classified as an employee.
You are safer if your independent contractors are required to have a professional license, or require extensive specialized skills, education or training in order to accomplish the work. The easier it is for the work to be completed, the more likely an independent contractor will be reclassified as an employee.
Protect yourself. Learn about changes in the independent contractor laws and how you should evaluate these critical business relationships. We invite you to contact us or call today at 858-535-1511 for a free and substantive Dynamex consultation. Learn how to avoid the expense of employee misclassification audits, and come into compliance with new federal and state law.