Employment Relationships - Overview

What is an employment relationships? The employment relationship is the legal link between employers and employees. It exists when a person performs work or services under certain conditions in return for payment. What kind of employment relationship you have is governed by the actual work done on the job and statutes, case law and regulatory agencies. Unfortunate for most employer the agencies do not all use the same criteria for determining the relationship but there are some common themes: who has the control, is the work in the usual scope of business of the company and is the work customarily engaged in considered independent business. The main types of relationships are: employer/employee, employer/volunteer, business/independent contractor and employer/intern. The relationship that causes the most trouble is the Employee vs Independent Contractor classification. There are some great benefits but also some great risks in classifying your worker as an employee vs independent contractor. An employee is a person employed for wages or salary, especially at non-executive level. An independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. A volunteer is a person who freely offers to take part in an enterprise or undertake a task. An intern is a student or trainee who works, sometimes without pay, at a trade or occupation in order to gain work experience.

Best Practiced

Employers should give careful consideration to the type of relationship that will be formed before engaging a worker to perform services. In a lot of instances the employer is in the best position at the beginning to influence whether the employment relationship is formed by giving up control over the details. In other situation, the nature of the job requires to exercise significant control over the details in which the business may have little alternative to the formation of an employer/employee relationship. In either case accurate assessment from the beginning will be essential to determine the obligations.

Financial and legal obligations

The existence of an employer/employee relationship will result in large financial and legal obligations. The obligations are listed as follows:

• Payment of California and federal tax on employee wages;

• Contribution to California State Disability Insurance (SDI), California Unemployment Insurance (UI), and California Employment Training Taxes;

• Contribution for Medicare as required by the Federal Insurance Contributions Act (FICA);

• Purchase of worker’s compensation insurance for employees;

• Participation in employee benefits programs, including retirement plans, stock plans, health insurance plans, vacation policies, paid sick leave policies, and other benefits plans (not all required in CA but enticing to employees);

• Compliance with California and federal wage and hour laws, including rules of payment of overtime and minimum wages, obligations to provide meal and rest periods, issuance of wage statements that comply with California law and termination pay rules;

• Compliance with California and federal disability accommodation laws;

• Compliance with California and federal leave laws, such as the California Family Rights Act (CFRA) and the Family and Medical Leave Act (FMLA);

• Compliance with California and federal anti-discrimination and harassment laws; and

• Compliance with other California and federal employment laws.

Topic will continue next week. Below are links to different government agencies forms on the employment relationship for your review.

https://www.dol.gov/whd/regs/compliance/whdfs13.pdf

http://www.edd.ca.gov/pdf_pub_ctr/de38.pdf

https://www.dir.ca.gov/dlse/faq_independentcontractor.htm

http://www.taxes.ca.gov/icore.bus.shtml

Please do keep in mind that the actual work done, and control used is what is considered in all these tests not just what was agreed upon or intended at the beginning of the relationship.