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Employee Misclassification Penalties Can Be Severe

As a business owner, you understand the value that your employees provide to your organization. Depending on your industry, you may also rely on several different types of employees – including independent contractors – to maintain your company’s success. In the state of California, however, how you classify your employees is important, and misclassification can lead to costly penalties.

An accurate classification of your workforce is paramount. Our lawyers at Lobb & Plewe can help businesses as they take active steps to avoid potential violations. By consulting with a legal professional who understands your business, you can better protect yourself from legal action due to wage and hour misclassifications.

Defining An Independent Contractor

If your business utilizes independent contractors, you are likely aware of their fiscal advantages. In instances such as short-term projects, a contractor can provide a cost-effective solution as they do not warrant workers’ compensation insurance, tax withholding or overtime considerations. Recent law changes, however, have narrowed what constitutes an independent contractor, and they must now meet three strict criteria:

  • A degree of freedom: As it pertains to their performance, a contractor cannot be under the direction or control of their hirer.
  • A unique area of service: A contractor must be performing work that is outside of the normal scope for your employees.
  • A history of independent work: A contractor must have a demonstrable history of independently offering their services to businesses or entities.

California’s independent contractor qualifications are limiting, and applying the contractor distinction to employees is increasingly difficult. In the interest of avoiding penalties that can be as high as $25,000 per violation, the aid of an attorney in your classification determinations can prove valuable.

We Can Help You Protect Your Business

If you are uncertain about the classification of your employees, our attorneys can offer you guidance. For a consultation regarding the future of your business, call us at 951-335-0465 today. You can also contact us via email to arrange for a meeting.