Legal Question in Employment Law in California

From the questions you pose, red flags have already been raised as to whether you have misclassified the people you regard as independent contractors. It is common for small employers to want to consider people who provide service to their business as independent contractors, to avoid payroll taxes and workers comp insurance. The problem is, the label given to them, even if they sign contracts saying they are contractors, is not controlling on the state or federal government.

There is a list of about 20 factors that are considered by various agencies in determining whether a person is an employee or independent contractor. Among the more important considerations are the degree of control the business has over the job the person does, as well as whether the service provided is an integral part of the business.

The closer the relationship these individuals have to your business, the longer the relationship and the more your rely on their services, the more likely they have been misclassified. If your business is ever audited by the EDD, Labor Commissioner, or IRS (and yes, they do work together), the more devastating the potential consequences may be if they find the people working for you have been misclassified. You may be looking at having to pay back taxes, penalties and more.

I cannot urge you enough to take the time to consult with an experienced labor law attorney in your area, to review the nature of your business, what these people actually do for you, and the risks that may be present if you continue listing them as independent contractors. This is not something you should do on an open forum over the internet.