Being Independent

July 4th, 2023 marks the 247th year of our country’s independence from British control. It is only with the great strength, intelligence, tenacity and commitment of our Service Members and Veterans that has kept this country an independent nation for all these years. Independence comes with risk, something all who have served this nation understand.

Business Owners understand this risk also. It is so wonderful to be free to do as you wish, run your business as you like, market and brand your company as you see fit. But no one is giving you a paycheck and protecting you if you fail to bring in clients and revenue. Risk and reward go hand in hand.

Many Business Owners may decide to bring on Independent Contractors or 1099 Subcontractors to help them with their everyday business operations. Everything from Marketing, Bookkeeping, IT Services, Virtual Assistants and more can now be a very easy, affordable and accessible way to effectively run the business without the cost of full-time employees on the payroll. Before you consider doing this you will need to make sure that the 1099/Independent Contractor is a true Independent Contractor. Just because you decide that is what you want to classify them as, does not mean that the State will classify them as so. There can be huge consequences to incorrect classification of employees including back taxes, fines, back work comp payments and more. Ignorance is not an excuse and as a Business Owner, compliance with the laws and regulations of your state is mandatory to reduce risk to your business.

• Information Sheet: What’s New? Employment (DE 231) Rev. 14 (1-22) (ca.gov) https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de231.pdf

• A great tool can be found at Employment Determination Guide (DE 38) (ca.gov) https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de38.pdf This is an effective checklist to review that can help you determine whether an employee is a W2 employee or a true 1099 Independent Subcontractor.

Once you have determined that you do in fact have 1099 Independent Subcontractors, you will need to have tight, and SIGNED Agreements with each of them that includes a Hold Harmless clause. You should have a Business Attorney in your pocket to assist you with this as a solid Agreement can not only prevent frivolous claims against you but can show that you have done your due diligence in conducting proper business protocol. Kelly Bagla, is an attorney I highly recommend for this. www.baglalaw.com

You should also require the 1099 Subcontractor to carry their own insurance (1M limits minimum), issue a Certificate of Insurance to you, name you as Additional Insured (to their policy) with Primary Non- Contributory and Waiver of Subrogation endorsements in your favor. This has become very standard and should not be a big ‘ask’ to them. Part of your due diligence as a Business Owner will be to update and check these annually and keep accurate records of the certificates.

Independent Contractors can make your business flourish and can save Business Owners a lot of headache and money. And being an Independent Contractor is a wonderful gift and opportunity that our great country allows us. We all have a personal responsibility to respect and abide by the laws surrounding this and take all necessary actions to ensure compliance so we can keep our freedoms intact.

I wish you all a celebratory July 4th (but please be careful with fireworks!!!)!

If you have any Business Insurance questions, please reach out to me. www.hlinwood-insurance.com