Who Can Be Classified as an Independent Contractor in San Diego?

Who Can Be Classified as an Independent Contractor in San Diego?

Who can be classified as an Independent Contractor in San Diego?  What is the difference between an “employee” and an “independent contractor” in the eyes of federal and state law?  This line has substantially changed over the past few years due to a landmark decision by the US Supreme Court and a very recent decision by the California Supreme Court.

The EDD recently announced they are cracking down upon misclassification and have hired additional auditors to pursue significant civil fines and back payroll taxes for California.  Those employers who have classified workers as an independent contractor will be asked the following questions:

  1. What portion of the income of the independent contractor comes directly from your company?  Any figure above 60% will lead the investigating agency to lean toward “employee” instead of independent contractor.  Independent contractors gain their business from multiple sources, and are not reliant on one major source for their income.
  2. Do you require independent contractors to have a specialized degree or professional license?  If so, you are more likely to be able to maintain an independent contractor relationship.
  3. How hard is the work to perform?  If it is relatively easy, and most workers could perform it you are likely to face a challenge.  The work performed by independent contractors must be relatively difficult, and most workers in your business should not be able to accomplish these tasks.
  4. How integral is the work of independent contractors to your business’ viability?  The higher the percentage of work that’s accomplished by independent contractors, the higher the likelihood that you will face a a battle over who can be classified as an Independent Contractor in San Diego.
  5. Did your company invest in or actually form the LLC or business structure that is used by your independent contractor?  What investment did the independent contractor themselves make in their own business?  The more impact your company had upon the business start-up of your independent contractor, the more likely you are to face misclassification allegations.
  6. Is the independent contractor able to establish pricing that affects their own profitability or losses?  If not, they are more likely to be considered as an “employee.”
  7. How much control do you have over the scheduling of work?  Have you provided tools or technology (PC, phone)?  If so, this is probably an “employment” and not an independent contractor relationship.

A company who has misclassified employees as independent contractors will face heavy civil fines (up to $25,000 per misclassified employee) as well as payment of all employment related taxes, benefits and employment related insurances (such as workers comp) for a lookback period of 2-3 years or more.

Who can be classified as an Independent Contractor in San Diego?  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.  The Watkins Firm will work to evaluate the relationship of your independent contractors and your exposure to misclassification audits and the financial consequences that accompany them.

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