California Supreme Court Ruling Discourages the Classification of Workers as Independent Contractors Rather than Employees

On April 30, 2018 the California Supreme Court issued a ruling which significantly skews the previous criteria for classifying workers as employees or independent contractors towards a finding that a worker is an Employee.  Thus, it is now more crucial than ever for business owners to ensure proper classification of its workers. If you are a business owner, take heed: this ruling could directly impact your bottom line.  Additionally, other States are highly likely to follow California's revenue generating example and establish similar legal precedents of their own.

California Business owners must now establish three concrete facts to legally classify workers as independent contractors. These facts are as follows:

1. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
2. That the worker performs work that is outside the usual course of the hiring entity's business; and
3. That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

The IRS' focus on employment tax fraud can mean jail time for noncompliant business owners who willfully misclassify their workers. If you are suspected of taking part in an employment tax evasion scheme, you need a skilled, knowledgeable, and aggressive criminal tax defense lawyer on your side especially where facing an employment tax audit or criminal tax investigation. Lastly, if you believe you may have misclassified workers and wish to get out in front of this problem, contact an attorney to discuss your options including the IRS's Voluntary Classification Settlement Program.  See the full version of this article HERE.

Dave Klasing, [email protected], 800-681-1295

SOURCE Tax Law Offices of David W Klasing, PC

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