Classification of Independent Contractors
Many businesses are classifying workers as independent contractors when the proper classification is that the workers are employees. Significant cost savings can be achieved by classifying employees as independent contractors, so employers have an incentive to misclassify. The California Employment Development Department (EDD) uses a questionnaire to assist businesses in analyzing the relationship between the worker and the employer.
Besides the EDD a workers compensation auditor may impute the payroll of an independent contractor if you are not able to clearly establish the contractor is independent.
The EDD penalties for misclassifying workers can be quite severe, so a careful analysis should be done prior to paying a worker as an independent contractor. The workers compensation penalty is more premium. Please let me know if you need help with this analysis and/or if you would like me to email you the questionnaire.