The Lowdown on Independent Contractors            

You’ve been hearing the buzz, that the EDD and IRS have adopted new rules and are cracking down on the improper practice of using 1099 “employees” or more accurately, independent contractors in positions that should be categorized as employees. The buzz is accurate. Not only are government agencies cracking down, but Google is a powerful tool, and workers are becoming innately knowledgeable of labor law and far more apt to fight for their rights than before. Let’s break it down so you understand the rules and liabilities.

For a quick refresher, please refer to our earlier post on the new rules surrounding Independent Contractors https://blog.infiniumhr.comindependent-contractors/ but don’t worry, we’ll summarize here.

 The 20 Rule Test is History
Earlier in the year, the California Supreme Court made changes to the rules surrounding Independent Contractors. The new rules state that for a worker to be properly classified as an independent contractor, they must meet ALL the following rules:

1. A)  The worker is free (contractually and in fact) from the control and direction of the hirer in connection with the work;
2. B)  The worker performs work that is not the hiring entity’s usual business;
3. C)  The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

This means, that although an employer who uses independent contractors may meet some of the old rules, or even a portion of these new rules, if you don’t meet all of them, you fail the test and your Independent Contractors is an employee.

 This is Serious Business
The state of California has basically made it almost impossible to utilize Independent Contractors anywhere in your core business operations. There isn’t a lot of gray area here, coupled with the fact that the California Labor Department and the Employment Development Department are cracking down on misuse of Independent Contractor.

Bottom Line
The use of independent contractors in your business is a difficult area to play in, and it is highly advised that you obtain wise counsel from a trusted legal or HR source (like Infinium HR) before you proceed. If you are using independent contractors now, please contact us and we can review to see how the situation fits with the new legal parameters.

As always, contact Infinium HR if you have any questions or areas where you need guidance. We’re here to help!