If you own a business in California, there are several benefits to hiring independent contractors instead of employees. According to the Department of Industrial Relations, employers do not have to pay payroll taxes for independent contractors or provide meal periods. They also do not have to provide financial reimbursement for business-related expenses, or cover independent contractors with workers’ compensation insurance.
Because of these benefits, some employers incorrectly classify employees as independent contractors. But, be careful. If a government agency finds out you are doing this, then you could face severe legal consequences. This is why you should carefully research each employer-worker relationship so you follow the proper regulations.
If you have questions about laws related to independent contractors and employees in California, contact Eric D. Anderson Law, LTD. A Redlands business attorney will evaluate your situation and help you comply with local, state and federal laws.
Call 909-283-5494 today to schedule a consultation. Until then, read on to learn about the differences between independent contractors and employees in California:
Are Your Workers Independent Contractors or Employees?
There are several government agencies involved in determining whether a worker is an independent contractor or employee. Examples include:
- The Employment Development Department;
- The Division of Labor Standards Enforcement;
- The Franchise Tax Board;
- And the Division of Workers’ Compensation.
Each of these agencies may have unique definitions of “independent contractor” and “employee.” A universal definition does not exist. The best way to determine if your workers are independent contractors or employees according to a specific agency’s definition is to consult a commercial lawyer.
Here are a few questions that your attorney will ask:
- Is the principal or worker a consistent part of your business operations?
- Do you provide the worker or principal with the necessary tools to do the work?
- Does the job require a specific skill?
- Does the principal or worker labor in your office or facility?
- How long has the principal or worker been under your employ?
- How do you pay the worker?
Just because a worker signs an agreement that states he or she is an independent contractor does not necessarily mean that he or she is an independent contractor according to a government agency’s definition. The courts and Labor Commissioner evaluate the characteristics of the worker-employer relationship to make this determination. In some cases, the existence of an independent contractor agreement had been insufficient in the face of other evidence that the worker is indeed an employee.
Independent Contractors vs. Employees for Tax Purposes
According to the California Tax Service Center, the most important factor in determining whether a worker is an employee or independent contractor is whether the employer has the right of control and direction over the means and manner that the worker completes the job. If you can fire the worker without cause, then you probably have the right of control and direction. The Internal Revenue Service will also evaluate the employer’s degree of behavioral and financial control, as well as the nature of the relationship between both parties.
If you have questions about the legalities of employer-worker relationships, contact Eric D. Anderson Law, LTD. We will evaluate your business and provide comprehensive legal guidance. Call 909-283-5494 today to schedule a consultation with a Redlands commercial lawyer.