UPDATE — The California Assembly is currently drafting Assembly Bill 1850 that seeks to clarify the rules and modify the exceptions for employee classification created by Assembly Bill 5 discussed below. Check back for further updates.
In 2018, the California Supreme Court rendered its decision in the Dynamex case that significantly altered the rules used to classify workers as employees or independent contractors. In an attempt to “simplify the rules” and “help” workers in the gig economy the California legislature passed, and the Governor signed, Assembly Bill 5 (AB 5) in 2019. The bill codified the worker classification tests used by the California Supreme Court. Prior to the passage of AB 5 many industry lobbyists were busy in Sacramento getting exceptions and special rules included in AB 5. As a result, the worker classification rules are now very complex, have many exceptions and come with significant penalties for noncompliance. (more…)
By Abe Livchitz, Senior Tax Manager
ASL Construction Group
The issues related to proper worker classification impact many businesses, including contractors. The rules are often unclear and their application is based on each employer’s specific facts and circumstances. An Internal Revenue Service or California Employment Development Department audit resulting in the reclassification of workers can have a significant bottom line impact. As a result, it is important to correctly determine if your workers are employees or independent contractors. (more…)
Employee versus independent contractor is not a new issue, but if you’re not sure your workers are correctly classified, it is time to revisit this issue. The IRS has rolled out its Voluntary Classification Settlement Program (VCSP). The VCSP allows employers who are currently treating their workers as independent contractors or other nonemployees and want to prospectively treat the workers as employees to come clean under the program…