Despite multiple opportunities for people to earn an income as independent contractors in today’s gig economy, California increased regulations meant to protect employees. In the process, legislators made it more difficult to classify employees under a contractor status.
Reports over the past few months suggest differing opinions on whether this will be a positive change – both for employers and workers. However, as a business owner, you may be wise to carefully consider how you classify your staff.
Three ways to determine whether someone is an employee
As of January 1, 2020, you must use the “ABC” test to determine the status of those working for you. As such, the state defines the people providing services to your business as “employees” except in cases where you can meet the following three qualifications.
If you question whether someone is an independent contractor, you must consider whether they:
- Perform their work without your direction or control
- Complete work outside of your usual scope of business
- Hold a position that is the same as your business, but is typically considered to be of an independent nature
Some fields are exempt from these regulations. For example, the California Dental Association (CDA) secured exemptions through the finalized language of the recently-established employee classification statute. However, given the integration of a dental worker’s connection with your business, it may be challenging to classify them as independent from your employ.
Why is employee classification important for your business?
You may treat everyone who works for you well and consider them a valuable part of your company. Though, proper classification is an essential part of protecting yourself from potential disputes. You may find this especially important in light of increased employee protections.
Misclassification could create liability in matters which include:
- Break violations
- Unpaid sick leave
- Employment taxes
As with all business decisions, proceeding with caution may be the best way to protect your interests. And legal guidance throughout the process can minimize problems while you work toward your goals.