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IC Threatens Lawsuit California

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  • IC Threatens Lawsuit California

    My Girlfriend is self-employed and owns a very small business which hires independent contractors to assist. To get an idea of how small, the business saw less than 90k last year total. Most of this went to her IC's.

    Since about the middle of last year she has retained the services of one particular IC with whom the over the course of the last few months she has been discussing offering a full time position.

    Over the last several weeks, her and the IC have been working with a firm that provides HR services under the pretense of the conversion from IC to employee and this week had plans on sitting down to negotiate the terms of her employment.

    This is where it gets interesting.

    The IC contacts her and persists to discuss taking a vacation for 2 weeks in August (which is understandable as it was assumed, given she accepted the offer that she at that time will be an employee). As a response, she told her she was going to offer her in the contract, 5 company holidays and 5 paid vacation days to which she could use for whatever she wanted. This immediately did not sit well with the IC as it became clear to her she would only be paid for one of the weeks of her vacation if she agreed to the offer. She went into a tirade claiming my GF never cared about here, that she had no intention of giving her benefits, raises, or commissions (which was a bit startling considering she had not even seen the offer letter yet) and is now threatening to sue her for overtime wages etc she had not received since she was contracted in the middle of last year. Needless to say, there where a few other choice words used but I will spare you the indecency. For the record, this IC is very bright and great at what she does. This conversation comes as a shock because it is completely opposite of how we have come to know her.

    Being that the tone, speech and allegations made where less than pleasant, my GF told the IC, that given her current feelings and behavior she did not feel comfortable continuing the relationship and ended it.

    We are now concerned about how she might proceed and are wondering whats the best way to protect ourselves and the business. She does business in California and the govt here is not very business-friendly which is what worrys us most.

  • #2
    Past of this are beyond my ability to respond to, so I will pick the one obvious area I can respond to. Your question implies that the worker classification is something decided by the employer or the employer and worker in discussion. Legally this is not correct. Worker classification between employee and independant contractor (IC) is a function of statutory law, specifically IRC and FLSA at the federal level.

    The risk is that the worker will file claim(s) that they were ALWAYS an employee, and the employer failed to handle them correctly. The UI claim is the likely starting point.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)


    • #3
      My Girlfriend is self-employed and owns a very small business which hires independent contractors to assist. To get an idea of how small, the business saw less than 90k last year total. Most of this went to her IC's.
      Your GF may have a world of problems here...
      Not only is IC classification a federal issue, but Calif goes beyond that... the type of business, what the "IC" does among others.
      And....if this "IC" is found to be an employee, there may be taxes your GF is responsible for as well as back workers compensation premiums she failed to pay.
      What she has done is basically "pay under the table" here.... just because it's convenient for the employer to designate an ''employee'' as IC, and provide a Form 1099, doesn't make it so.

      Consultation with an attorney would be in order here. Sooner than later.


      • #4
        I would highly suggest your girlfriend take a basic course in HR and business law as she seems to be lacking the foundation necessary to run a company. At the very least she should sign up for some training classes on hiring and FLSA.

        The others are correct. Your GF may be liable on many different fronts if she hired someone as an IC who should have been an employee. That does not mean she must offer PTO or holidays, but she does need to pay taxes, have WC insurance and observe OT regulations to start off. CA also has quite a number of other laws which she need to be aware of if she is going to hire even one employee.
        I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.


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