We’ve all heard the stories about how startups tend to prefer to classify their workers as “independent contractors” rather than “employees.” Uber is a current and classic example of this legally risky phenomenon.
But, according to today’s Business Insider, startups are apparently now second-guessing this strategy. There’s a budding new trend among startups now to classify their workers as employees rather than independent contractor. Sure, the employer still faces significant financial and other costs when using employees rather than independent contractors, but there’s a new realization among many startups that it’s better for business to classify their workers as employees.
Many startup company employment lawyers will sleep better tonight! We have been preaching for years that, in many cases, it’s just too risky to try to squeeze a worker under the independent contractor umbrella. There’s a strong presumption in California that a worker is an employee. To rebut this presumption and legally classify someone as an independent contractor, various tests must be met. It is a complicated and uncertain analysis. The costs to the company for getting it wrong — especially a small company or a startup — can be crippling.
You can read the Business Insider article here.