California Environmental Protection Agency’s Classification Requirements Require an Investment in Your Business

By: Mark Zisholtz
Edited by: Brandon Pavley


This commentary is in reference to content found on the California Environmental Protection Agency’s website. Please visit their site for more information.

Unfortunately, we commonly see misclassified independent contractors who fail to make an investment in their business, such as buying equipment or investing in software. Further, many companies want to engage independent contractors on a personal services contract. While prohibiting an IC from hiring workers to perform the services set forth in a contract does not automatically mean the IC is misclassified and is in fact a common practice, it is also true that the chances of misclassification drop rather significantly if the independent contractor is permitted to hire workers.

Such is the case with the California Environmental Protection Agency, which explicitly requires all independent contractors who want to be on the agency’s “approval list” to have the “proper equipment” (i.e., the IC must invest in its own business) and “qualified personnel to conduct the tests” (i.e., no prohibition against the IC from hiring workers to perform services under the contract).

Oregon Independent Contractor Classification Law Reminds Us What is Important

By: Mark Zisholtz
Edited by: Brandon Pavley


This commentary is in reference to content found on the State of Oregon’s website. Please visit their site for more information.

It is not uncommon to hear procurement or HR personnel claim their independent contractors are compliant because they are a business entity and signed documentation indicating they are an independent contractor. However, nothing could be further from the truth. Take, for example, the State of Oregon, which explicitly states that “[t]he creation or use of a business entity, such as a corporation or a limited liability company, by an individual for the purpose of providing services does not, by itself, establish that the individual provides services as an independent contractor.”

Further, currently sitting in a congressional committee in the U.S. House of Representatives is the Payroll Fraud Prevention Act of 2015 which defines “non-employees” as those who provide services through a corporation or LLC if they are required to create or maintain such entities as a “condition for the provision of such labor or services.” In other words, if the Payroll Fraud Prevention Act ever were to become law in its current form, then an independent contractor would automatically, by operation of law, be deemed misclassified if you required that contractor to form an entity as a condition of providing services!

Moral of the story: look to the substance of the relationship, not the form.