In California, as it is with essentially any state, the laws for employing, paying, and recording usage of an independent contractor vary greatly from those of simply hiring a company employee. In many instances, usage of independent contractors can alleviate strains placed upon you or your business due to employment laws, especially the strident restrictions and prohibitions of California’s. Though, applying the title of an independent contractor to someone does not make them an independent contractor. So what does? What are the laws and stipulations of hiring an independent contractor? How will it help my business in California to know and understand the usage of these laws? Keep reading for the need to know laws and legal information on independent contractors in California.
The Legal Definition of an Independent Contractor in California
Classifying an independent contractor could be one of the most important aspects of the legal relationship with the person at hand. Many fall victim to the belief that by operating under certain conditions they will be unaffected by misclassification penalties, but this is simply not true and it is important as a business owner to learn the definitions used by governmental agencies in their definition of independent contractors. One of the most important factors in determining if someone is an independent contractor or employee is the right to manage the manner and means of accomplishing the desired result. In California, courts and agencies have generally applied common law practice in determining the status of independent contractors.
Compensation, Federal Taxes, and Hourly Wages of Independent Contractors
As mentioned previously, the laws for compensation, taxes, and hourly wages of independent contractors varies greatly from that of company inducted employees. Recently the California Supreme Court have applied six further conditions as to determine the status of independent contractors and have discarded the common law test as the sole means of definition. This decision has impacted not only worker’s compensations but other employee-related matters also.
The IRS is responsible for determining the relationship between a company and employee on a federal level and misclassification on a company level can lead to your business incurring large government penalties as well as employment taxes. Misclassification can also be particularly troublesome for businesses at this level as they may lead to aggressive audits and financial penalties by the IRS. During wage claim processes or audit proceedings, the California Labor Commission is responsible for determining the true relationship between an individual and company. This is commonly done by using the right to control as well as several other factors as determined by the California Supreme Court.
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