Is it possible to eliminate independent contractor misclassification risk in San Diego?  There are a lot of questions about putting a stop to independent misclassification exposure in San Diego especially as it relates to the recent Supreme Court ruling.  Many San Diego and southern California businesses rely upon independent contractors as part of their core business strategy.  However, the recent California Supreme Court ruling in the Dynamex case creates substantial risk for San Diego employers and business owners who rely upon 1099 workers.

Important New Information About Independent Contractors in San Diego

The important takeaways from the Dynamex decision are:

• California law has a new legal presumption that all workers are classified as employees.  The legal burden now lies with the provider of work to prove independent contractors are not misclassified employees.
• Independent contractors cannot provide services which are related to the core aspect of the business at hand.

The New ABC Test for California Independent Contractors

Have you heard about the new “ABC Test” for justifying the classification of an independent contractor in California?  In order to classify a worker as a 1099 or independent contractor the Supreme Court requires the provider of work (employer) to prove:

A – the worker is free from control and direction over performance of the work both under the (employment) contract and in fact,” and

B – the provided is outside the usual course of the business for which the work is performed (in other words, if the fruits of the work provided directly contribute to the success or profitability of the company or provision of any of it’s primary services the worker must be classified as an “employee.”), and

C – the worker is customarily engaged in an independently established trade, occupation or business.  (In other words, works for multiple customers, has their own entity and is not primarily focused upon the same nature of conduct or business as the provider of the work).

The Financial Exposure to Employers Who Misclassify Independent Contractors

Why is it so important to eliminate independent contractor misclassification risk in San Diego? The cost of ignoring the important and game changing developments of this landmark decision cannot be overstated or exaggerated.  Findings by agencies such as the California EDD, the Labor Commissioner or even the IRS have resulted in civil fines of $25,000 per incidence, as well as reimbursement of associated “employee” federal and state income taxes for a look back period of four years.  In addition, companies who are found to have misclassified employees as independent contractors must pay related state unemployment, workers compensation, FICA and other payroll related taxes for the worker during the look back period as well.

You are then required to post a notice in a highly visible location in your business which tells all independent contractors of the misclassification finding.  This invites a snow ball effect of additional findings and financial exposure.  Finally, plaintiff’s attorneys are heavily advertising to misclassified independent contractors in order to generate new cases based on the Private Attorneys General Act or upon unpaid overtime and benefit compensation such as vacation and healthcare for the period they “should have been paid as employees.”

What Can You Do to Eliminate Independent Contractor Misclassification Risk in San Diego

The goal to eliminate independent contractor misclassification risk in San Diego and associated financial exposure has become a primary focus for the employer defense attorneys at the Watkins Firm.  We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.     Ask about the implications of the new Supreme Court ruling, how to become compliant and strategies for transitioning at risk workers without raising unnecessary additional issues or financial exposure.