295 - Do You Have to Hire Employees in Your State? with Madeline Cintron

On today's episode of the podcast I talk with Madeline Cintron about worker classification documents.

Get the State-By-State Classification Cheat Sheet at www.notavglaw.com/cheatsheet

Madeline is a rising 2L in law school and an intern here at the Not Your Average Law Firm working on our worker classification and LLC formation documents. Compared to Madeline's regular law school work, these projects have entailed different research and allows Madeline to see how cases and statutes have been interpreted to modern day perspectives. 

The first project Madeline worked on for my law firm is the State-by-State Classification Cheat Sheet. This answers the key question of if someone legally can be a contractor or if they have to be an employee. The rules are different in every state but typically follow similar guidelines, like the ABC test which you can read about at notavglaw.com/contractor-or-employee

In her research Madeline often found that states were defaulting more to employees instead of contractors to protect workers. She found that at least 50% of states were using the ABC test. The big part of the ABC test that often gets people is B which says that you cannot have someone as an independent contractor if they provide services that are "within the usual course of your business." Lawyers are often excluded. 

In addition to the ABC test, some other states will assume that the person is a contractor and it's up to the worker to prove that they were meeting the requirements of an employee and puts the burden on them instead of the employer like it is with the AB5 test. 

Picking Florida as an example, they use a Totality of the Circumstances test. This test is they consider all factors of the test instead of just one when determining if a worker is an employee or contractor. Some factors may weigh more than another factor, but no one factor is determinative. 

Different states provide different tests to different areas of the employment code. For example, in Illinois, for Worker's Comp purposes they use the right to control test. For wage and hour laws they use the Six Factors test, for unemployment insurance they use they ABC test and for anti-discrimination laws they use the right to control test. 

In California, before we had AB5, in 2018 we had a Supreme Court case that is what ended up applying the ABC test to the wage and hour laws. Wage and hour laws are what govern how much you have to get paid for overtime, when you get lunch breaks, what minimum wage is, all that kind of stuff. I researched it a lot and determined back then that you'd only have an issue with the ABC test if you're breaking any of those laws. Once AB5 passed it applied the test too all the different areas of employment law, not just wage and hour laws. 

Looking back at the Illinois examples of unemployment insurance. Unemployment insurance is paid through payroll. To my understanding the only way to pay unemployment insurance is through payroll so they'd need to be an employee. 

Get the State-By-State Classification Cheat Sheet at www.notavglaw.com/cheatsheet


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