Classifying Employees as Independent Contractors May Be Risky in California

The classification of workers in California faces further complexity with the introduction of a United States Department of Labor rule effective March 11, requiring employers nationwide to use a detailed multifactor analysis for determining employee or independent contractor status. Although the California Dental Association secured exemptions under Assembly Bill 5 for dentists, the definition of an independent contractor remains ambiguous. Consequently, dentists are urged to exercise caution when classifying workers to avoid noncompliance. The new federal rule scrutinizes worker misclassification, prompting dentists to reassess their classifications to align with state and federal laws. Under the Fair Labor Standards Act, economic dependence on the employer for work is a key factor in determining employee status. Despite the federal rule not preempting California laws, dentists must comply with AB 5, predominantly classifying nondentist workers as employees. The practice owner is solely responsible for ensuring correct worker classification to mitigate potential liabilities, including tax implications and legal penalties. Click here to read more.