Benefits vs. Write-offs: Are you better off as a Contractor?
California Workers Misclassified as Independent Contractors
While the employers are cutting off many costs by classifying their employees as Independent contractors, the IRS and the state of California are cracking down.
Employers who have deprived employees of their basic rights by misclassifying them for being independent contractors and using this in their own favor by avoiding tax payments, compensation benefits given to the workers and not paying overtime to the employees.
The IRS is taking keen interest in this situation because it is benefiting both the Government that is facing monetary shortages and the employee who is being disadvantaged of his benefits. Government is benefiting because the employers who are not paying taxes by making false classifications of employee as independent contractor are the funds that they need and the employee is being restored with his rights too such as overtime etc.
There are many federal laws and in addition to that the state laws that are trying to make sure that employee is not misclassified. There are many differences that occur in both the law sets but one thing that they agree on is the definition of employee which is the basis, and according to the law employee is a person whose actions and results of the work are controlled by some contractor, in other words way we can say that he is being supervised and directed by the contracting person.
In continuance of understanding whether the person is an independent contractor an employee a 20-factor test is developed that tells the controlling power of the contracting person. These three components are brought forward by the IRS and social security administration.
Behavior control: this determines that how much right worker of the task has control over the accomplishment of some task assigned.
Financial control: how much role is played by the worker to control the business aspect of the project?
Relationship of parties: how do both the parties consider their relation to be?
California Labor Code and California Tax Code have many laws in it to determine the classification of the worker. When it comes to the enforcement of the wages and working hours law Division of Labor Standards Enforcement (DLSE) make the worker go through “economic realities” test which shows clearly the amount of control of the worker on the task performance.
If you think you’ve been misclassified and are owed overtime or benefits we may be able to help you collect back to 2010. Call our San Francisco Employment Attorneys TODAY.
Photo Credit: Shutterstock/Vlad Teodor