I don’t know about you, but I always worry about employers and their benefit plans when I see articles like this one in the LA Times: “Independent Contractor Status Scrutinized.” That is because misclassification issues can create problems with employee benefits plans. (Read about it in previous posts here and here.) The article reports that the state of California is cracking down on “businesses that wrongly claim employees are independent contractors and, as a result, not subject to a slew of taxes and labor laws.” While obviously such action is intended to uncover those employers who might be abusing the system by improper classification of their workforce, there are other employers who aren’t involved with such abuse, but who will find this worrisome due to the difficult issues that arise in deciding whether to classify individuals as “employees” or “independent contractors.” Sometimes it is not so clear whether an individual is an “employee” or “independent contractor” because the individual may have characteristics of both in his or her relationship with a company or firm. And as this site of the California Industrial Relations Board here indicates: “[I]t is possible that the same individual may be considered an employee for purposes of one law and an independent contractor under another law.”
You can read more about worker classification under IRS rules here. See also this post discussing another state’s scrutiny of worker misclassifications here.