On Friday the California supreme Court ruled that a sub contractor can not be a sub if they are providing the same service as the hiring business and they are now considered your employee. Basically, if you’re a window cleaning company and you sub window cleaning out to another person, they are now you’re employee.
I haven’t subbed anything since we first opened but I know several individuals where this is there model. How would the government find out? I don’t know, but if you know California, they’re pretty ruthless when it comes to employee issues. My guess is if you sub out work, you probably want to make sure the person you’re subbing to is incorporated. I think that would be the only way you get around this. The ruling states anyone in the same line of business providing the same service, so I figure a corporation obviously can’t be someone’s employee which gets around this rule. But I’m not an attorney and this ruling just came out on Friday.
Here’s a link to an article about the ruling but there isn’t a lot of detailed information:
Or setup a separate corporation be like a home advisor.
You charge a fee that Corp doesn’t clean windows
as far as I’m understanding it’s not that they can’t offer the same service as you, it’s that they can’t ONLY be doing the work for you. They have to have their own business unrelated to you for them to be considered an independent contractor.
i e a hair stylist who is working as an independent contractor but only ever does her work inside of the same salon. If they spent half their time in that salon and half their time working elsewhere I believe they would still be considered an independent contractor.
At least this will even things out for the companies trying to do things legit. There are so many companies doing things illegally in so cal. Once things adjust, prices should go up, and it be possible to build a proper window cleaning business again in Cali.
The high rise market has been completely diluted by companies hiring subs.
The question is, how will this be enforced?
That’s the question I have. No clue on enforcement.
Is this just another attempt by failing unions trying to get a base back?
Does California really have a huge problem with false sub contractor claims?
Seems if I was a company looking to sub work out it is obvious I would want a contractor whose main service would be within the same scope of work that I wanted performed this common sense.
Any ideas why they have done this?
Money. From a failing state, with big spending problems and debt.
If all the subs were employees, then they would pay more in taxes. Employees don’t get to write off expenses generally. They also are putting more money in the unemployment pools.
Employment taxes and workers comp. California has been hard on subs for a long time. This is just another step to eliminate the practice unless you are a licensed GC. To be fair a lot of businesses do have “subs” that they 1099 and leave those people high and dry on taxes and what not or work comp if they get injured working for them.
I personally don’t care about this because I don’t sub. But you can find yourself on the wrong side of the franchise tax board if they deem your sub is an employee. And that’s actually probably how this will be enforced, through the tax board. And if you know anything about the CA tax board, you DO NOT want to be on their radar. PERIOD.
add the DMV to that list…
I just read the court document, on page 7 it outlines it for you.
Here is part of what it says:
“Under this test, a worker is properly
considered an independent contractor to whom a wage order does not apply only if
the hiring entity establishes: (A) that the worker is free from the control and
direction of the hirer in connection with the performance of the work, both under
the contract for the performance of such work and in fact; (B) that the worker
performs work that is outside the usual course of the hiring entity’s business; and
© that the worker is customarily engaged in an independently established trade,
occupation, or business of the same nature as the work performed for the hiring
So its nothing different then before. Subs SHOULD be in the same industry is how I read.
I guess I view it differently. Exactly why someone should contact an attorney. In my view how do you sub work out and not be in control and direction of that individual and the performance of that work. When you sub work does it not have a deadline, does it not have to meet you and your clients standards? Also, viewing it in your way would put b and c in conflict. B states the work has to be outside the usual course of the hiring entity’s business. That would seem to me, that if you clean windows and it’s logical that you’d hire window cleaners for that, then those you sub/hire must actually be an employee since that’s your usual business. C would seem to me that “nature of work” would be subbing things in the “cleaning idustry” as an example, but not your usual business and that individual is an actual business in that specific work, or his/her usual course of business. So if you’re a window cleaner but you sub out pressure washing because you don’t do that, then you’re ok. Window cleaner subbing window cleaning that is the usual course of your business, not ok.
That’s how I read that?
Agreeing with @mshramek.
@thorSG1 - If that’s what C means, then the ruling makes no sense, is irrelevant, and the barber shop guy can continue business as usual with his subs.
no the barber cannot since they are NOT:
customarily engaged in an independently established trade,
occupation, or business of the same nature as the work performed for the hiring
entity .” since 100% of their work is at his shop.
this is why when i subcontracted a friend to do some of our storefronts i asked him to buy his own tools and encouraged him to get his own customers since if he used my tools or got 100% of his window cleaning work from me the government would view him as an employee, on the other hand if he uses his own tools and has his own customers then i’m simply subing him for some work
I Haven’t read previous comments, but I know Construction companies will form partnerships for large projects, to eliminate some taxes, couldn’t it be kind of the same way for window cleaning subbing work?
I’ve heard rumors that California is going to break off from the United States of America, and float off toward N Korea. Sources sited can not be confirmed though.
Just putting the actual wording of the decision. If you read the whole appeal you will get a better picture of what is being said. Its a good rule. Its not about screwing the little guy at all (again, how I read).
Good night family.
Yep, expounding on what others have said, it’s part B that applies to the topic at hand. My question is, how do they define “usual course”? I personally think it could have a broader definition than just doing the same service. Perhaps you could demonstrate that you’re subbing window cleaning only for projects that are larger than x size, ones that would not be in your usual course of business (and you would not even bid) without bringing in outside help. Or maybe you only sub out for work in towns outside your usual service area. Just musing here.
Part C is simply stating that the sub must have their own gig going on, and it has to be the same type of work as what they’re doing for the company subbing them work.
For instance, you can’t sub window cleaning to someone just because they have their own company, if their company does flooring or something else completely unrelated to window cleaning.
Wasn’t there someone here on the forum from San Diego that got hit with a huge penalty, because he had all his employees as subs? That must have been about 1 year ago .
- The worker performs work that is outside the usual course of the hiring entity’s business.
Please clarify so I get this correct.
The “worker” refers to the sub, if hiring company is a window cleaning business they cant sub window cleaning type services to the sub?