How to Navigate California’s New Independent Contractor Laws

We all know that hiring the right people can make or break your business. Because bringing on a new employee is such a big decision, companies often try and hire an independent contractor because it is less expensive and allows for much more flexibility. An employee can cost a company up to 30% more because the employer is mandated to pay Social Security and payroll taxes, unemployment insurance taxes, state employment taxes, worker’s compensation insurance, paid time off and, depending on the size of the company, health insurance. The growth of companies like Uber and Lyft has recently brought the independent contractor issue front and center. According to the California Labor Commissioner’s website, the misclassification of workers as independent contractors costs the state roughly $7 billion in lost payroll taxes each year. This, along with the demands of workers, recently tipped the issue into new territory.  

California Supreme Court ruled on the Dynamex case

In April 2018, the California Supreme Court ruled on the Dynamex case, which narrowed the scope of who can be qualified as an independent contractor. The burden of proof is on the company to prove that all three of the following are true (known as the ABC test.)

1. They must be free from control and direction in connection with performing the work.
2. They must perform work that is outside the usual course of your business.
3. They must also be engaged in other independent work under their own business entity.

As an example, the court said that someone who sews garments for a clothing manufacturer, using material that the manufacturer provides, would be considered an employee, not an independent contractor. That would be the case even if the employee worked at home and set his or her own hours, since the production of clothing is the company’s core business. There are currently two pending bills that will either roll back the ABC Test (Assembly Bill 71) or reaffirm that California businesses must follow the new ABC Test (Assembly Bill 5). In either event, and based upon the current law, if your business hires independent contractors, then now is the time to reevaluate so that your business can avoid significant legal exposure down the road. While you can likely get away with classifying someone like a social media strategist or a web developer as a contractor, provided they have their own business entity and they do work for other clients, but where people can get in trouble is bringing on contract support for things like back-office tasks and general assistance. Take this as an example: You’re a growing small business and you need help with organization, scheduling, client follow-up, etc. You find out that one of the moms at your school has a background as an executive assistant and is looking to pick up some part-time work. You two really like each other so why not help her? Sure go ahead and hire her as a part-time employee but don’t bring her on as a contractor. Almost anything an assistant does will be seen as integral to your business. You’re going to give her direction, and she (at least for now) is not doing this type of work for other small businesses.

So what to do?

U.S. companies have been outsourcing support services for decades. Think call centers in places like India and the Philippines. The people in these countries are well educated and well trained. They are eager to work and find the opportunity to work from home a godsend. Engaging with an assistant (referred to as a Virtual Assistant / VA) is one way to not have to worry about California’s labor laws.

Why the Philippines is best

There’s an estimated population of 103 million people living in the Philippines, and most of them speak, read, and write English. Also, many have college degrees. I can tell you first-hand, working with VAs in the Philippines for over four years, and having spent time in the Philippines, Filipinos are friendly, hardworking, loyal, reliable, and trustworthy.

What can they do?

Pretty much anything you can screencast they can do. Task examples: email management/filtering, calendar management and scheduling, travel management, social media management, website/blog management, updating CRM system, customer service, file management, database building/updating CRM, digital file storage & organization, report creation, forms creation and management, document and presentation creation/management, online research, data mining & development, lead generation, deadline/deliverable tracking, project management, and much, much more. You can recruit VAs on sites like Upwork,  Freelancer and Fiverr.  

Hiring a virtual assistant and incorporating them into the growth of my company was one of the best decisions I’ve ever made as a business owner

Working with a VA can be a lifesaver, but finding the right VA and creating a bullet-proof system to effectively assign work and manage outcomes is not as easy. Get support in building basic systems for your businesses so the VA can implement and manage these systems moving forward. If you have questions about hiring a virtual assistant and want more information go to https://hhub.wtestaging.com/assistant/.