Why should employers be concerned about rectifying employee misclassification in San Diego and Southern California?  The misclassification of employees as a 1099 workers or independent contractors in California can result in heavy civil and financial penalties including back pay, overtime, payroll taxes, benefits and even retirement contributions.

The Target on Your Back as an Employer in California

The Department of Labor (DOL), IRS and several California state agencies such as the Employment Development Department or EDD are aggressively targeting employee misclassification in an attempt to generate significant income for their governments.  The experienced and proven employer defense attorneys at the Watkins Firm protect and defend employers in employment law actions, misclassification cases and PAGA lawsuits, and work to prevent our clients from misclassifying employees, especially as independent contractors or 1099 workers.

Government agencies are pursuing employers with independent contractors.  This is due to a recent Supreme Court decision that has fundamentally changed the ingredients that establish and govern an “independent contractor” relationship with your company.  The question of whether or not a worker was an independent contractor or employee used to center on issues of control and oversight, including the scheduling of work, provision of tools or technology and the establishment of price.

In its landmark decision, the Supreme Court noted that it is primarily the “financial relationship” between the parties that helps to answer the question of whether they are truly an independent contractor, or they are a misclassified employee.  If the independent contractor gains more than 60% of their income from a single source the agency will take a hard look at the situation.  This opened the door to an extensive new California law based upon the “Dynamex case” and increases the urgency of rectifying employee misclassification in San Diego and Southern California.

The Impact of the Dynamex Case on California Employers

Dynamex created an important new legal distinction related to California employers: All workers in California are legally presumed to be employees.  The legal burden of proof of classifying a worker as a 1099 worker or independent contractor now falls upon the employer.

Next, California implemented the “A-B-C Test.”  If the provider of work wishes to classify a worker as an independent contractor or 1099 they must be able to prove the following:

• “that the worker is free from control and direction over performance of the work both under the contract and in fact.” and
• “that the work provided is outside the usual course of the business for which the work is performed,” and
• “that the worker is customarily engaged in an independently established trade, occupation or business.”

If the worker contributes in any way to the products and or services provided by the employer to their customers, and or doesn’t have their own separate company with it’s own separate book of business they will fail the A-B-C test.

The results of the Dynamex case has lead the Watkins Firm to help our employer clients to focus on rectifying employee misclassification in San Diego and Southern California as our state tax agencies search for new sources of revenue.

Contact the Experienced, Proven Employer Defense Attorneys at the Watkins Firm

If you are concerned about 1099 or independent contract worker misclassification in San Diego we invite you to review our Podcast Episode 28 – Common Employer Disputes and Defenses, the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. The legal and financial risks and exposures associated with employee misclassification are simply to substantial to ignore.