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Independent Contractor or Employee — How do you tell the difference?

I recently had a client ask me whether he could avoid all the hassle of payroll taxes, withholding, unemployment insurance, workers’ comp, minimum wage, overtime, etc. — just by issuing 1099’s to all his staff and treating them as independent contractors.  The short answer?  No.  I mean, think about it.  If it were that easy, everyone would be doing it.

And in fact, many employers are doing this.  But they are also taking on a lot of risk.  Because if the government finds out — let’s say, because you try to fire the “contractor” and he seeks unemployment benefits through EDD, or he decides he really wants some overtime and files a complaint with the Department of Labor — you can be liable for very large penalties, plus interest on all the payments owed.  As anyone who has been through an employee audit will tell you — It’s generally not worth the risk.

So, how do you know whether a worker can legitimately be classified as a contractor vs. an employee?   Read more

Five Reasons Small Business Owners Should Not Rely on Online Contract Forms

We live in a Do-It-Yourself society, especially now that the secrets of the universe can be unveiled with a simple google search. If you can learn how to build a bomb or do brain surgery on the Internet, surely you can figure out your own legal advice. So, one of the most common questions I hear is: Can’t I just download a form (or use an online service like Legal Zoom), instead of paying for a real live lawyer?

It’s a good question. And, being a life-long “Do-It-Yourself-er,” I understand the appeal. But there are lots of reasons why this is a really bad idea . . .

1) The Short Answer: Would you really attempt brain surgery based on what you read online? No of course not — at least not on someone you cared about! And while drafting legal documents is not quite the same as brain surgery (and usually won’t have a life or death impact), it is similarly difficult to do well without lots of specialized training and experience. Here’s why:

2) You Can’t Really Tell Good From Bad (And Why It Matters): When a non-lawyer downloads a legal document he has no way to determine its quality. I’ve found many “legal” documents on the web that clearly were not drafted by lawyers (this is especially true in the world of web developer and artist agreements). Even if you download from a supposedly reputable site, like or Legal Zoom, there is a wide range of quality in the documents available. Without legal training, you have no basis for determining best, worst or mediocre.

Why does it matter? Read more