by Mark H. Sklarow, CEO, IECA
California’s State Senate and Assembly have approved legislation with the governor’s support that will change the classification of most contract workers into employees and all of the protections and benefits granted employees, including minimum wage protections.
The legislation will impact all California-based businesses, including independent educational consultants who hire others as contractors to provide tutoring, essay review, financial aid, and more.
The legislation institutes a three-part basis for determining whether someone in California is a contractor or employee, including:
1. Is the job being performed part of the company’s core business?
2. Does the ‘boss’ direct the way the work should be done?
3. Has the worker established an independent trade or business?
A person is considered an employee if they meet ANY of the three standards. So, those who use essay reviewers or test prep tutors would be required to treat those workers as employees as they are part of the IEC’s core business. This would mean meeting other state laws, including paying appropriate taxes, meeting minimum wage guidelines, and providing vacation time for many of those affiliated workers. Even if the essayist establishes his or her own business, “Essay Tutors of Santa Monica” for example, it is unlikely to be enough to categorize the worker as a contractor.
Note that this will not include business-to-business contracting; for example, a web designer hired by an IEC would not be considered an employee since this work is OUTSIDE the core purpose of the business.
If this bill is signed by the governor, it will not take effect until next year. It is expected to grant employee protections to an additional 400,000 workers in the state. The state is acting, in part, to assure that salaried workers will pay into social security and boost state tax revenues.
Stay tuned for updates and additional information. IECA will provide guidance to California-based IECs when details of the law are delineated by state agencies.