Independent Contractor Test Must Be Retroactively Applied
Who: Businesses that employ California based contractors or freelancers
When: Effective Immediately
Following a decision of the 9th U.S. Circuit Court of Appeals, businesses are now liable for determining whether California workers are employees or independent contractors using an “ABC” test. The test must be applied to workers hired before April 2018.
The ruling states that employers must prove a worker is an independent contractor based on three conditions:
- The contractor’s work performance is independent of the employer.
- The contractor performs work outside of the employer’s “usual business.”
- The contractor conducts an independent business, doing the same type of work that is being done for the employer.
The contractor is an employee under California’s wage orders if no elements are met. The employee is entitled to minimum wage, overtime, rest/meal breaks, and other requirements.
Review all 1099 employees and determine whether they meet the “ABC” test.
Retirement Savings Program
Who: California employers with 5+ employees that don’t offer a retirement savings program
When: Registration opens July 1, 2019. Deadlines vary by business size:
- 100+ employees: June 30, 2020
- 50-100 employees: June 30, 2021
- 5-49 employees: June 30, 2022
Employers with 5+ employees, who don’t already offer a retirement savings program, will be required to offer a plan from the private market or provide access to the CalSavers Retirement Savings Program.
Employers are meant to be a pass-through for access to the CalSavers Program and not responsible for making contributions to the individual retirement accounts. The program is funded by an automatic 5% payroll deduction. Employers will be required to automatically deduct contributions from employee paychecks and send payroll contributions to the program.
- Determine if your business must meet the new requirements and the date of your enrollment deadline.
- Review your current retirement savings program and determine if you need to make changes.
- If you don’t have a program but are required to offer an option, conduct a business assessment on which option best suits your needs, how you will communicate and implement the changes with payroll and your employees.