Wednesday, May 07, 2008

SB 1490: Independent Contractors

We all know that misclassification of Independent Contractors is a problem in California. We also know that there is a lot of confusion by small business owner what constitutes an Independent Contractor and in some cases the definition by EDD and the IRS are different.
SB1490 has been introduced by Senator Padilla. What it does according to the analysis by the Senate Committee on Labor and Industrial Relations

" Requires a person employing labor in California to provide an individual hired as an independent contractor a form developed by EDD that includes 1 a notice that the individual has been hired as an independent contractor 2 the factors EDD uses to determine to determine whether a person is an employee or an independent contractor 3 a statement explaining the impact that the individual's status has on his or her tax obligations and eligibility for labor and employment protections and 4 a notice of the individual's ability to request from EDD a determination as to whether the individual is an employee or independent contractor and means by which this determination may be obtained.

Requires an employer to maintain, for not less than two years, specified records identifying all persons hired as independent contractors and to make those records available for inspection upon request of EDD, a member of the Industrial Welfare Commission, or the Department of Industrial Relations.

Grants an individual hired as an independent contractor the right to request a determination by EDD as to whether he or she is an employee or independent contractor.

Expands the application of existing civil penalty and misdemeanor provision to the compliance requirements for record keeping and access with respect to independent contractors
Gives EDD power to develop the required form, to process the request for a determination, and to take all steps reasonably necessary to carry out the duties relating to independent contractors specified in the bill."

Please let me know your thoughts on this? Do you think this is important to small business. I will be talking to the point person in Senator Padilla's today. Your views will be expressed


C2C said...

This is helpful to educate the workers. But the real problem lies within the employers.
If workers are presented with IC agreements as their only choice, many workers will still work in this manner, only because the company is unwilling to engage with them as a W2. (they only care about saving $$)
The bigger need is for education & enforcement. My experience is that the HR department often has limited or no understanding of the policies/legislation the governmental institutions have put in place. They only become aware of their mistakes after an audit occurs.
Then three years later after a little turnover, there are new HR professionals in place and they make the same mistakes their uneducated predecessors made.

Danica said...

Hm, I wish I had found this earlier! I am dying for something like this to be put into effect. I got a telecommuting job via Craigslist a few months ago where I was told that I was an independent contractor and given a contract that outlined the different pay I could receive for different assignments.

There's a basic catch-all sort of category for things we might do to "help out" that aren't related to our normal jobs (and don't already have a pay rate). I've received that rate for some tasks, and assumed that when they instated weekly hourlong conference calls that I'd be paid at that rate. After a month of that, my paycheck arrived without this extra pay, and my boss blithely told me (when I questioned it) that indeed we would not be getting paid for the hourlong weekly meetings - just for the work we did as a result.

As I began researching the legality of this, I discovered that the work I was doing, by and large, didn't fit into the category of normal independent contractor work. The only IC characteristics my job had, essentially, were that I got to determine my own hours, and that I had to pay all the taxes and forego the benefits just as a contractor would.

I am lucky in that I have been working on my money and work issues for many years in Debtors Anonymous, where I regularly learn things like how to set boundaries with employers like this, how to watch my own back and check out that everything is legal, and how much to set aside in taxes. Before that, I would have just "sucked it up" and certainly wouldn't have known to put aside anything for taxes.

But even that only helps me with the learning curve here. If I had received information when I was hired about what being an independent contractor involved, and if my employer had had to know what that entailed and stick to it, I would have been MUCH better off.

I really wish that I could appeal to the EDD for help right now. Instead, I am doing my own research online and looking for an employment lawyer who can clarify whether they have to pay me for these meetings.

I'd say that obviously the problem lies with the employers, but that this is the kind of thing that keeps employers more honest and helps employers and employees keep everything above-board.

And I know that I am not alone in this. The more I read about it, the clearer it becomes that a LOT of employers are bending the rules and using the "independent contractor" concept as a way to bypass all kinds of workplace laws. A law like this would be a great start in curtailing this behavior.

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