Independent contractors may need to be replaced with employees as of January 1. Educate your clients. Help fill new roles.

Do any of your clients utilize independent contractors?  If so, and if they are in California, the law has changed as of January 1, 2020.  And, even if you’re not in Cali, you need to pay attention to Assembly Bill 5 as some states have the same restrictions, while others are reviewing similar legislation.   

“Under AB 5, which will take effect Jan. 1, Californians will be considered to be employees of a business unless an employer can show the work they perform meets a detailed set of criteria established by a California Supreme Court ruling last year. Under those criteria, a worker is an employee if his or her job forms part of a company’s core business, if the bosses direct the way the work is done or if the worker has not established an independent trade or business.”

For a business to use independent contractor rather than employee as a classification, the firm has to show that the worker is free from the control and direction of the employer.  The business also has to show the employee performs work outside their primary business and that the employee typically engages in an independent trade or occupation.  

Hiring independent workers means that those employees are not subject to various government rules such as overtime, required breaks and minimum wage, worker’s compensation, unemployment insurance, sick leave, and the employer’s paid portion of each employee’s social security tax.  

Staffing companies can use this as an opportunity to talk with their clients who use independent contractors and ensure they are not misclassifying their workforce.  It’s not only the additional staff members you hire that need to be properly classified, it’s also ensuring existing employees are properly classified.  

Offer your services to cover all of the above items if your client can no longer use independent contractors and cannot or does not want to immediately replace with permanent staff members.  Or, your client simply may not have the time or resources to hire on their own and cover all of these employer mandated expenses.  Many staffing firms also offer health insurance and paid holidays as well.  

Michael Rubin, the attorney who represented employee rights and labor organizations, noted that AB5 will  “accelerate the trend by states toward expanding worker protections, in part as a counterweight to the restrictions on worker rights under federal law.” 

Three years ago, over 8% of the United States workforce was made up of independent contractors.  Use this as an opportunity to work with clients who can no longer classify some of their employees as independent contractors, and need to hire additional staff.