W-2 Contagion? The “ABC” Test Federalized?

If you followed our mini series on California’s latest law AB5, you know that independent contractor “1099” status just got tougher in CA. AB5 seriously increased the ability for state and federal governments to reclassify workers from independent contractors to “employee”(W-2) status. If this is not a topic you are familiar with, you may want to watch this 5 part mini-series.

Episode 1The Dynamex Case

Episode 2Dynamex Exemptions

Episode 3Dynamex Penalties

Episode 4Dynamex What You Can Do

Dynamex UPDATE

Other states are paying attention. Why? This is a a BIG revenue generator! According to NY Attorney Melssa Camaire, signs are now pointing to New York considering the ABC Test in 2020 with proposals currently being lined up in NYS senate. In Illinois, State Representative Will Guzzardi, claims he is interested in following California’s law. Wisconsin, Oregon and Washington may join the party as well.

More interesting, is the bill recently introduced in Congress, “The Protecting the Right to Organize Act” which would seek to federalize the “ABC” test. The “B” prong is where the problem for the mortgage industry lies; ‘‘(B) the service is performed outside the usual course of the business of the employer.” Ouch!

It has been long known and continuously debated, that mortgage originators are “employees,” for many reasons. Not only the SAFE Act, not only the IRS test, but employer control, business license and insurance requirements do not bode well for the independent argument. Mortgage loan originators do not have contracts with lenders, credit reporting services, technology providers and other agreements with third party vendors. The business does. Yet some hold outs, are still able to justify the “worker-employer” relationships as somehow separate entities.

With Temporary Authority under Transitional Licensing right around the corner, everyone should be payig attention. MLOS are “employees.” The application actually requests “Worker Classification.”

There is general confusion about “outside salespeople” who are paid by commission and the claim that they are “independent.” They are TWO SEPARATE issues. How you and your employee agrees on compensation and what form that compensation is reported to the IRS on, are not dependendent on one another.

If you remotely think you have misclassified workers, now is a good time to speak with a tax attorney or CPA.

For more information: deb@cloes.online. 856-256-3766