The stiff challenges for San Diego businesses with 1099 workers continues in San Diego.  A substantial increase in EDD and IRS audits based upon the explosive ruling by a recent California Supreme Court case.  What changed for 1099 workers in California and what are the risks associated with this development?  What can the Watkins Firm do to help California businesses to come into compliance with the new labor environment in California?

The most important change associated with the recent independent contractor classification ruling is the legal presumption that all workers in California are classified as “employees” unless the provider of work can prove otherwise.  The burden of proof has shifted to the employer in the matter of misclassification of employees as independent contractors.

The new ABC test will provide stiff challenges for San Diego businesses with 1099 workers.  Failure to comply exposes your business to substantial financial consequences which often threaten the continued viability of businesses in question.  The EDD and other agencies can require business which fail to comply to pay the federal and state income taxes on amounts paid to a “misclassified” independent contractor for a look-back period of up to four years.  California will apply a civil penalty (usually $25,000 per instance) and will seek recovery of all back unemployment, workers’ compensation, social security and other employer-related payroll deductions which “should have been made.”  In addition, the employees themselves can sue their “employer” for the value of benefits (i.e. vacation, healthcare) which were offered to “employees” as well as unpaid overtime and other wage and hour issues.

The Watkins Firm cannot overstate the importance of this new ruling and the potential for substantial if not catastrophic financial exposure for companies who are found to have misclassified employees.  We work with our clients to come into compliance with all federal and state employment laws.  We work to help transition existing independent contractors and negotiate sensitive agreements which help to potentially reduce your risks.

The stiff challenges for San Diego businesses with 1099 workers will continue for years to come.  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.

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To set up a free, no-obligation consultation with our knowledgeable San Diego business lawyers, call us at 858-535-1511 or contact us online.