- Misclassification of an employee or a contractor can have severe tax and other consequences for the employer.
- Article “Classifying Workers: Contractors or Employees?”
- Friedman Stroffe & Gerard, P.C. again selected as one of “Top Orange County Law Firms”
- FSG’s Jim Stroffe featured in Orange County Business Journal’s “Law Firms Special Report”
- Robert Gerard and Bryan Friedman attend Surf Industry Waterman’s Ball event
- Friedman Stroffe & Gerard once again selected as one of OC’s top law firms
- FSG adds high-profile litigator, Richard W. Millar, Jr., as Of Counsel
- Susan Arduengo moderates panel on “Closing the Wage Gap” for Newport Chamber
When hiring workers, employers sometimes choose to classify the worker as an independent contractor rather than an employee, either in the belief that it is less expensive or burdensome for the employer or at the potential worker prefers to be treated as independent contractors rather than as an employee for personal reasons or to potentially delay or avoid payment of taxes.
For employees, the employer must withhold and remit income and employment taxes from wages or salary paid to the employee to the taxing authority, including an additional employer contribution. Each year the employer is required to issue IRS Form W-2 to each employee specifying the amount earned and the taxes withheld during the prior year.
There is no requirement for withholding or remitting taxes for independent contractors and the employer is only required to issue IRS Form 1099 to the independent contractor if the amount paid during the year was $600 or more. Moreover the independent contractor is generally not entitled to any benefits available to employees.
However, the tax withholding and reporting obligations for employees or independent contractors are substantially different and wrongful misclassification of an employee or a contractor can have severe tax and other consequences for the employer. The employer could be liable for payment of the taxes that should have been withheld in addition to the employer’s share of the employment taxes, interest on those taxes and possibly penalties. In addition the employers could be subject to a class action lawsuit arising from the misclassification on behalf of all workers misclassified over several years. The resulting liability could be substantial and devastating.
The relevant factors necessary to determine whether a worker should be classified as an employee or an independent contractor include whether the worker was engaged in a separately established occupation or business; whether the worker could be discharged at any time without cause; the skill required to perform the services and accomplish the desired result; whether the worker or the service recipient supplied the tools, equipment, and place of work; whether the work was an isolated event or continuous in nature; whether the work was part of the hiring entity’s regular business; and the relationship the employee or independent contractor believed that they were creating. Almost every case is unique and turns on its specific facts, but the principal relevant fact has been whether the hiring entity had the ability to control the “manner and means” or the details as to how the worker completed the work.
The risk of a wrong classification has been simplified (and restricted) by the recent matter of Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County decided in the California Supreme Court. Dynamex was not decided in the context of an income or employment tax dispute, but rather in the context of a California Industrial Welfare Commission wage order which is arguably not applicable in determining a worker’s status for tax purposes. However it is likely that the California Employment Development Department, which oversees worker classification issues for California income and employment tax purposes, will refer to Dynamex when making a determination as to the employment status of a worker.
Dynamex articulates an “ABC” test to determine whether a worker is an employee or an independent contractor. The “ABC” test provides that a worker is properly classified as an independent contractor if the hiring entity can establish that: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both as provided in the underlying contract and in fact; (B) the worker performs work that is outside the usual course of the hiring entity’s business; (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
Under these requirements almost all workers would likely be classified as an employee because of the requirements of the “B” test unless the worker is truly outside the scope of the hiring entity’s business. A contractor providing plumbing services to an apparel manufacturer would fit that provision. However a contract clothing designer may not. Likewise, a contract attorney providing legal services for a law firm would almost certainly be classified as an employee.
Employers would be well advised to closely examine the legal ramifications when determining the classification of workers and seek legal advice if there is any doubt. The consequences of an incorrect classification could be extremely problematic.
Bryan Friedman is a shareholder at Friedman Stroffe & Gerard, P.C. in Irvine, California. He is a shareholder of Friedman Stroffe & Gerard, P.C. and chairs the firm’s Corporate and Business Practice Group. Contact him at firstname.lastname@example.org or 949.265.1106.
The contents of this article are intended for general information purposes only and should not be construed as a professional opinion on any specific facts or circumstances. Professional advice should be consulted with regard to specific application of the information on a case by case basis.
For the 3rd year in a row, FSG has been selected by the Orange County Business Journal for its annual list of the top law firms in Orange County. Over 1,000 law firms, comprising over 16,000 attorneys, operate in Orange County, so ranking in the Top 100 is significant.
Jim Stroffe was selected to provide his perspective in a Q&A section of the Orange County Business Journal’s “Law Firms Special Report” on March 19, 2018. Jim discussed legal trends relating to the real estate industry, employment, business litigation, and other topics in his Q&A article.
The Business Journal’s Peter Brennan asked some of Orange County’s top attorneys for their views.
FSG partners Robert Gerard and Bryan Friedman attended the 2017 “Waterman’s Ball” on August 5th at The Ranch in Laguna Beach, hosted by the Surf Industry Manufacturers Association (SIMA) .
The event raised money to support 19 ocean environmental organizations and is spearheaded by the SIMA Environmental Fund. This year’s honorees included Waterman of the Year Bethany Hamilton, Environmentalist of the Year Cyrill Gutsch, and Lifetime Achievement Award Winner Herbie Fletcher. SIMA also recognized Fernando Aguerre, President of the International Surfing Association, with a special award for his tireless – and successful – quest to get surfing into the Olympics.
See more details at: https://www.shop-eat-surf.com/content/photos-from-the-28th-annual-watermans-ball
FSG has once again been selected by the Orange County Business Journal for its annual list of the top law firms in Orange County.
FSG first submitted the survey data in 2016 and the firm was immediately selected, ranking #76 in FSG’s first year on the list. FSG moved up to #74 on the 2017 list. The list is compiled by Orange County Business Journal staff through surveys distributed to and completed by local law firms. Over 1,000 law firms, comprising over 16,000 attorneys, operate in Orange County, so ranking in the Top 100 is prestigious.
IRVINE, CA, January 16, 2017 — Richard W. Millar, Jr. has joined Friedman Stroffe & Gerard, P.C. (“FSG”) as Of Counsel. Millar will work in FSG’s Litigation and Real Estate & Construction groups. FSG is a leading transactional and litigation law firm based in Irvine.
Millar has been a practicing attorney in California for approximately 50 years. He is well-known in the Orange County legal community as a top litigator and as a regular columnist for “Orange County Lawyer Magazine” (official publication of the Orange County Bar Association) with over 160 articles published. Millar’s practice is primarily business, real estate, and construction litigation. Over the years, he has been hired by almost every title insurance company operating in Southern California to litigate real estate title issues. He has tried over 100 cases to verdict and handled over 50 Appeals. Millar has represented owners, general contractors, and subcontractors in a wide variety of construction disputes.
Millar has received Martindale-Hubbell’s A-V rating for 35 years. The A-V rating is the highest rating possible for both legal ability and ethics. He has a 10 AVVO rating and is listed in Who’s Who in the World, Who’s Who in America, and Who’s Who in American Law.
In 2015, Dick received the Franklin G. West Award from the Orange County Bar Association, which is the Bar’s highest award presented to an outstanding attorney or judge who has advanced justice and the law.
Millar served for several years on the Orange County Superior Court’s Arbitration and Mandatory Settlement Conference panels. He has also acted as a private mediator. He has served as an expert witness in the Orange County Superior Court in attorney malpractice actions as well as attorney fee disputes. Millar started his legal career in Los Angeles, first as a law clerk and then as Deputy District Attorney in the Los Angeles District Attorney’s Office. He then moved into private practice and for the last 35 years was a partner at a prominent Orange County firm. Millar received his J.D. from the University of San Francisco. His memberships have included the American Bar Association, American Bar Foundation, Orange County Bar Association, Peter Elliot Inn of Court, and the Association of Business Trial Lawyers. In 2002, Millar served as President of the Orange County Bar Association, which is one of the largest Bar Associations in America.
“We are very pleased to have Richard join our firm,” says James D. Stroffe, managing shareholder. “His stellar reputation and vast experience in litigation will be a tremendous asset in serving FSG’s clients. Also, having Richard join us makes FSG the only law firm in Orange County that has two former Orange County Bar Presidents in the same firm (Robert Gerard was the Bar President in 2003).”
On November 8, 2016, FSG’s Susan Arduengo moderated a panel on Closing the Wage Gap before the Newport Beach Chamber of Commerce. The panel included Mediator Katherine Edwards, Senior Counsel for Taco Bell Natasha Pfeiffer, and CEO of Tigress Negotiating Zelekha Amirzada. Susan initiated a lively discussion on a number of topics including understanding fair pay law, how employers can support women and avoid lawsuits, and how women can better advocate for themselves in the workplace. The event was a great success and brought light to a significant issue for both businesses and working women.
Questions? Contact Susan Arduengo at email@example.com.
FSG associate Susan Arduengo has been honored as one of the Newport Beach Chamber of Commerce’s Ambassadors of the Year. The three honorees for 2016 are Joe Lewis, Susan Arduengo and Brandon Roesler. A presentation for the awards will be given at the annual Newport Beach “Mayor’s Reception” on December 13th. More information is available at the Chamber’s website at https://www.newportbeach.com/. Congratulations, Susan!
Questions? Contact Susan Arduengo at firstname.lastname@example.org.
Grass, reefer, bud, or pot. Whatever your generation calls it (and the list of nicknames is long and oftentimes amusing), marijuana legalization is a hot topic across the country and in the workplace.
Although the list is ever changing, and may soon change in California, as of the date of this article, Alaska, Colorado, Oregon, Washington State, and Washington, D.C., have all legalized recreational and medical marijuana. Twenty other states, including California, have legalized medical marijuana. Additionally, this year several more states—Arkansas, Florida, and Missouri—will vote on the legalization of medical marijuana while Arizona, California, Maine, Massachusetts, and Nevada will vote on the legalization of recreational marijuana.
Since it went into effect in 1996, California’s Compassionate Use Act has permitted the use of medical marijuana for medical purposes. Recreational use of marijuana is still illegal in California. However, Proposition 64, the Adult Use of Marijuana Act, will be on the November 8, 2016 General Election ballot and California voters can decide whether adults may use, possess, purchase, and grow marijuana for recreational purposes. Nonetheless, the changes in state law in California and other states have not affected the legal status of marijuana on the federal level. Using marijuana, medicinally or recreationally, continues to be a criminal offense under federal law.
Notwithstanding federal law, a recent Gallup poll found that a majority of Americans now believe that marijuana use should be legalized for all purposes. Further, a 2015 study by the National Institute on Alcohol Abuse and Alcoholism (NIAAA) found that nearly 9.5% of the U.S. adult population used marijuana within the past year. Clearly, the stigma associated with marijuana seems to be fading.
Should California employers respond to the legal and cultural shift surrounding marijuana? And if yes, how? Let’s explore the interplay between marijuana and the workplace … (Read the complete article)
Susan Arduengo is an attorney at Friedman Stroffe & Gerard, P.C. in Irvine, California. Susan represents employers in all aspects of employment law, including counseling, compliance, litigation prevention, single plaintiff litigation, and class actions. Contact her at email@example.com or 949.265.1133.
By now, most businesses are aware of the obligation to have all business premises compliant with the Americans with Disabilities Act, which requires that disabled persons be afforded “the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” Recently, the U.S. Department of Justice and private plaintiffs’ attorneys have extended this obligation to online websites. Read the article.
If you require further information regarding this matter, you should contact Bryan Friedman (firstname.lastname@example.org) at Friedman Stroffe & Gerard, P.C. or an attorney regularly handling your affairs.