EMPLOYEE MISCLASSIFICATION: YOUR BIGGEST EXPOSURE?

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By Jon S. Heim, Harper & Heim, Lawyers

I have represented insurance producers for 31 years. I can’t count how many times I have heard the phrase “1099 employee.” It is always wrong. And nowadays, an employer can pay dearly for such a fundamental misimpression.

Someone who works for an insurance producer or any other enterprise may be an employee or an independent contractor, but never both. The two are mutually exclusive. Perhaps because employment entails costly taxes and benefits, many employers of every stripe strive to maintain independent contractor status of their workers. However, as I’ll explain, independent contractor status in the insurance production industry is more possible in theory than it is common, or even desirable, in fact.

1. Who Is An Independent Contractor?

Whether a worker is an independent contractor or an employee depends on one overall test and many specific subsidiary factors, most of which are well established. One of the best summaries of them appears in the web site of the California Division of Labor Standards Enforcement (“DLSE”), from which much of my Section 1 is taken.

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