Defining an Independent Contractor
On January 1, 2015, California Labor Code §2810.3 goes into effect. The new law creates joint liability for both labor contractors and their clients for wage payment violations and failure to provide workers’ compensation coverage. This liability applies if the work being provided is “within the usual course” of the client’s business and is performed at the client’s work-site. Some commentators state that this puts an extra burden on the client company to ensure that the workers hired by labor contractors are properly classified either as employees or independent contractors. Two recent cases from the U.S. Court of Appeals for the Ninth Circuit, Ruiz v. Affinity Logistics Corp. and Alexander et al. v. FedEx Ground Package Sys., Inc. clarify the definition of employees.
The good news is that the following are exempt from this law:
1. Individual homeowners or individual owners of home-based businesses;
2. Businesses with less than 25 workers; and
3. Businesses that use no more than five workers supplied by a labor contractor.
Read the full text of the law here.