California Supreme Court Ruling Significantly Limits Independent Contractor Classification
The California Supreme Court has established new criteria for classifying workers as Independent contractors. In Dynamex Operations West, Inc. v. Superior Court, the Court rejected the previous multi-factor test and instead issued a rigid 3-factor test, called the “ABC” test.
Under the ABC test, each of the following three factors must be met in order to classify a worker as an independent contractor:
- The worker must be free from the control and direction of the hiring company in performing the work.
- The work must take place outside the usual course of the business of the hiring company’s business.
- The worker is customarily engaged in an independent established trade, occupation or business.
This ruling will no doubt have a significant impact on gig companies in the Bay Area (Uber, Lyft, and DoorDash, etc.), […]
As a result of new legislation (the “Trade Preferences Extension Act of 2015,” passed by congress and signed by President Obama into law on June 29, 2015), penalties for failure to file information returns or to provide payee statements have been increased significantly. The new penalties are effective for 2015 forms that are due in early 2016.
In recent years many companies have found it very difficult to retain key employees. In order to mitigate this issue, many companies that are organized as partnerships are offering their essential employees an equity interest in the partnership, commonly called “profits only interests”. There are many risks, however, that companies organized as partnerships need to take into consideration before offering equity to their employees. They may be unaware that even a small equity interest can cause unwanted tax consequences such as over/underpaid FICA taxes, and can also change the treatment of compensation and company paid benefits. These are just a few of the risks that need to be assessed. If you’d like to know more please