Frequently Asked Questions About Contract Work in Los Angeles
The modern workplace is becoming more and more reliant on freelance and contract staffing for many business functions3 min read
The modern workplace is becoming more and more reliant on freelance and contract staffing for many business functions. Los Angeles is a major hub for contract work, which has its own regulations that must be followed to keep businesses operating legally. Contractors and business owners need to be aware of the answers to some of the most frequently asked questions about contract work in Los Angeles to stay on the right side of the law.
One of the most important things to understand is the distinction between an employee and a contractor. Generally speaking, employees are paid a salary and are provided benefits, while contractors charge a specific fee for service and are not given benefits or salaries. There is more nuance to this distinction, however, and navigating it is not always easy. There are certain tests businesses must use to differentiate between an employee and contractor, and even if a relationship is initially classified as a contract, it may change to an employee-employer relationship over time.
Businesses must also have a grasp of the applicable tax rules in order to remain compliant when hiring a contractor for services in Los Angeles. Generally, contractors are considered to be independent business entities, and so will not be subject to withholding taxes. On the other hand, the business hiring the contractor is obligated to fill out a 1099 form for the contractor if the payment made is above $600 within a given year, which the contractor can then use to self-report taxes on income.
Another important consideration is employment insurance. Generally speaking, a contractor is not eligible for unemployment benefits in the event that work ends, as this is typically the understanding between a contractor and the business hiring them for services. On the other hand, employees may be eligible to receive unemployment benefits if the business elects to participate in such a program. As mentioned, there are some subtleties within this framework, and businesses should consult with legal counsel to ensure they are meeting all the relevant obligations.
In Los Angeles, particularly, businesses should also be aware of the nuances and distinctions from other areas of the law, such as wage and hour law, when hiring a contractor. Although the contractor is not treated as an employee in the context of taxes and insurance, a set of rules will still apply to the relationship in regards to pay and overtime. The business must understand and abide by the applicable wage and hour laws in Los Angeles in order to remain in compliance.
Finally, at times a contract may be necessary to clearly outline the rights and obligations of the business and the contractor. Businesses hiring contractors are wise to consult a business lawyer in Los Angeles in order to create and review a contract. Not only is a contract helpful in a dispute, but it can also provide protection to businesses that utilize contractors, particularly if they are engaging the services of an independent contractor and not an employee.
There are numerous considerations when it comes to contract work in Los Angeles. As a general rule, businesses should consult with business lawyers as they navigate this ever-changing landscape. Whether through an in-house lawyer or on-demand legal resources, legal counsel is needed to ensure businesses remain compliant with the law and to protect against liability down the road.
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