Legal Question in Business Law in California

Just because you call them 1099 independent contractors, pay them that way, and issue them 1099's, doesn't make it so. Without reviewing the details of your business arrangements with them, there is no way I can tell you if you have legitmate, legally enforceable indpendent contractors, or employees. If they are truely contractors, you don't need worker's comp. If they are not legally contractors and instead are employees, you have bigger things to worry about than worker's comp.

Most taxing authorities (IRS and state) view so-called independent contractors with suspicion. If they ever audit you or your independent contractors, you can bet they will reclassify them as employees, then hit you for unpaid social security, etc. taxes, penalties and interest. Consult with an attorney in your area to review your situation.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

I agree with both of the previous answers. Different agencies have somewhat different guidelines for determining independent contractor status. Two factors that might weigh in your favor would be (if true) that these supposed "contractors" have their own insurance, and that they have their own licenses. If they have no workers' comp. and depend upon you for licensing, it'll be hard to defend independent contractor status.

Because it is financially advantageous for an employer to classify someone working for the company as an "independent contractor" (not only does the employer avoid the workers' comp costs, but it does not have to pay social security and other payroll taxes for independent contractors), and financially harmful to the "independent contractor" (who now has to pay self employment taxes (making up for what the employer normally would have paid)), the various governmental agencies take a very critical look at these classifications. Every situation is different and must be evaluated independent, and the penalties for incorrect classification can be significant, especially if deemed "willful" by the agency. My clients rely upon my analysis and recommendation, and can point out such reliance in the event of a dispute.

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