The IRS and the state of California are scrutinizing employers for improperly classifying employees as independent contractors. Typically, employers do this as a way of cutting costs; they can avoid payment of taxes, unemployment benefits, workers compensation benefits, overtime, etc.

The IRS is especially concerned with this issue because with the current deficits in the government, the taxes that are being avoided would be a welcome find, not to mention the benefits that employees are missing out on.

State and federal laws differ only slightly on how to determine if a worker can be classified as an employee or an independent contractor. The one thing that both state and federal can agree on is that an individual is considered an employee “if the person contracting for the services has a right to control and direct both the results of the services and the means by which those results are achieved.”

The IRS and Social Security Administration have developed a 20-factor test for determining the level of control held by the person contracting for the services. The factors focus on three primary components:

• Behavior control – the right of the worker to control how a specific task is accomplished
• Financial control – the right of the worker to control the “business aspects” of accomplishing a specific task
• Relationship of the parties – how the parties perceive their relationship

California also has several tests including those found in the California Labor Code and California Tax Code. When enforcing wage and hour laws, the California Division of Labor Standards Enforcement (DLSE) uses the “economic realities” test which, like federal law, focuses on the degree of control held by the person performing the services.

Labor law is complex; if you have any questions regarding your employment it is recommended that you contact a California labor law attorney who can help you understand your rights and in many cases will review your situation without charge.

Photo Credit: Shutterstock/michaeljung

The post California Workers Misclassified as Independent Contractors appeared first on UELG.

The memorandum of understanding (MOU)  is a directive that has joined the  U.S. Department of Labor (DOL) with California’s Labor and Workforce Development Agency (LWDA) in order to protect employees and create a more even system for regulating the classification of workers who are and are not eligible for overtime pay in CA.

California is not the only state to carry such an agreement with the U.S. Department of Labor.  Other states such as Maryland, Massachusetts, Colorado, Missouri, Montana, Illinois, Montana, Utah, Connecticut, Hawaii and Washington have similar MOUs. Information is being shared between state and federal organizations in an effort to aid in education as well as helping to increase both state and federal revenue due to an increase in taxable income.  By getting employees properly categorized as non-exempt, they will collect overtime pay, which is taxable and therefor the government makes more when you do.

The MOU was enacted partially as a result of multiple cases in which a company is based in one state and doing work in another.  The idea being that an employer should not be able to have an office in one state and do work in another where the overtime requirements are higher just to avoid paying the workers the state mandated rate.

Attempting to avoid paying overtime by misclassifying employees as independent contractors is not a new problem, though it has been an even bigger issue as the country’s economy changed. By classifying an employee as an independent contractor the company avoids overtime, medical benefit expenses and more.

The key is to remember two things: One, in CA the burden of proof is on the employer. They must prove you were ineligible for overtime pay. Two, your actual job duties define your exempt status, not a choice made by the employer. You can read more about exemptions here.

There are many details when it comes to CA Labor Laws. At UELG we help people every day who have been cheated or harmed by their employer. CALL TODAY for a free and CONFIDENTIAL review of your situation.

Shutterstock/Nagy-Bagoly Arpad

The post What is the California Labor Commission Doing for YOU? appeared first on UELG.

Has your company refused to pay you overtime or meet minimum wage requirements, or denied you benefits and workers comp protection based on the claim that you are not an employee, but a contractor?  The loophole of Independent contractor is used regularly for companies to have many people working for them without having to pay proper payroll taxes, benefits, insurance and the like. This is not a catch-all where the company can place everyone.  It is actually defined by the law who is and is not to be considered a contractor, but still some employers, either knowingly or not, will label workers as such to avoid any or all of the following:

• CA and Federal payroll taxes
• Meeting minimum wage and/or overtime requirements
• Providing proper paid and unpaid rest or break periods
•  Covering your expenses while doing business for them
•  Paying for your workers compensation coverage
• Covering unemployment, disability or Social Security taxes and payments.

The biggest catch here is the fact that if you are labeled an independent contractor your company is not required to adhere to a number of California labor laws as they pertain to wages or hours worked. It’s easy to see why this is a common tool for companies looking to cut costs on their workforce, but a true independent contractor is actually defined by their job and duties, not the whim of the employer as to whether or not they wish to pay you as an employee. While there is no exact legal definition of “independent contractor,” the Division of Labor Standards Enforcement (DLSE) has guidelines they will use to test the situation.  You are always presumed to be an employee first, and the employer must prove you otherwise. Some of the criteria that may be used to classify you as a contractor could be:

• The work you do for your employer is clearly different from the line of business they are in, i.e., you do all the website work for a company that builds houses.
• The job you perform is NOT a part of the regular business i.e., you are a market consultant for a company selling a product.
• You provide a service which would be considered a specialized skill.
• You were not given a permanent position but clearly hired to do a specific job just until completion.
• You work with no supervision or oversight, but rather are given a desired result and it is entirely up to you to fulfill this in your way.

Does this sound like your job? If not, and if you are working with close oversight and performing a function that would be considered part of the normal running of the business you work for, but your employer is still calling you an independent contractor, you are likely being labeled as such to save them money! It is not legal to claim contractor status on those who should be employees and leave them without protection and important benefits. If your employer has convinced you that contractor status is better for you as you can then use all of your “write-offs” come tax time, ask yourself, is my boss really going to do what’s best for me, or himself?

Don’t get left in the cold holding the bill.  If you have been mislabeled as a contractor, you are likely owed money in wages and business expenses, not to mention penalties and interest on the back wages which can go back as many as four years. United Employees Law Group is here to help. Call TODAY for your FREE review.  Don’t let another tax year come and go while you’re left holding the bag!

Photo Credit: Shutterstock/SpeedKingz

The post Who Really Benefits From Independent Contractor Status? appeared first on UELG.

In a recently filed class action against Legends Football League – formerly known as Lingerie Football League – the scantily clad football players allege unlawful treatment because they were wrongfully classified as independent contractors, when in fact, according to the Complaint, they are employees and are due overtime and are entitled to be paid minimum wage also.
Furthermore, the Plaintiffs allege violations of California labor laws as well as the Fair Labor Standards Act or FLSA.
The Lingerie Football League began as a halftime show during the Super Bowl, but soon grew into a 10-team football league in the United States.

What the Plaintiffs will have to show in order to win their case is how much control was exercised over them by the Defendant. If an employer controls hours and working conditions, then there is a tendency to believe that an independent contractor is really an employee, who then is entitled to minimum wages, overtime, and other protections such as workers compensation. Surprisingly, the contracts signed by the football players used terms such as “employ” and “employment” throughout the contract which required them to be present at practices and promotional events.
Should the Plaintiff’s win their case, they will be seeking twice the amount in damages, interest, and attorney’s fees.

The post Women in Lingerie Sue over Wages appeared first on UELG.