In most licensed occupations
in California, including private investigation agencies, the employer does not
have to pay workers’ compensation insurance and payroll costs if their worker
is classified as an independent contractor. Liability may also be eliminated or
reduced. Sometimes the worker, although skilled, does not have a PI license so
the agency says, “you’ll work under my license.” Knowing all this, it’s common for
private investigation agencies to misclassify workers as independent
contractors (1099 IRS form).
I was recently asked a question from a past student of mine
regarding the classifying of “employees” as independent contractors. My student’s
friend, argued, that you can have investigator “employees” working under a licensed
PI even if you treat them as an independent contractor. The truth is that
an overwhelming population of PIs, intentionally, hire investigator workers and
treat them as independent contractors all to save insurance, payroll costs, and to deviate from California’s
requirement that private investigators maintain a PI license. This student of mine and his colleague demanded legal
authority to support their position.
You can’t hire someone (including a close friend or family member)
and have them work for you as an independent contractor, without losing control
or the right to control the worker both as to the work done and the manner and
means in which it is performed (S. G.
Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d
341). Now, let’s say your debate opponent for today’s topic persists that 1099 workers
still do not need a PI license. All you have to do to win the argument is to
show him Business and Professions Code (BPC) 7523: “Unless specifically exempted by Section 7522
, no person shall engage in the business of private investigator, as defined in
Section 7521 , unless that person has applied for and received a license to
engage in that business pursuant to this chapter.” Then you ask your debate opponent
which law or other authority allows a licensed PI agency to hire an independent
contractor. There is none.
In case you’re wondering which legal authority allows you to hire
employees to do your investigative work, there is a legal theory called “the
law of agency.” This theory allows us to delegate our work to actual employees.
Otherwise, all you really have is BPC 7531: “A licensee shall at all times be
legally responsible for the good conduct in the business of each of his or her
employees or agents, including his or her manager.” Upon reading 7531, you can
imply there was legislative intent that private investigation agencies (licensees)
be authorized to hire employees to do work they are contracted for. Why else would
they create 7531?
Then, if your debating opponent is still not convinced he can’t
misclassify employees as independent contractors, show him Labor Code 2753 and its
penalty: "A person who, for money or other valuable consideration,
knowingly advises an employer to treat an individual as an independent
contractor to avoid employee status for that individual shall be jointly and
severally liable with the employer if the individual is found not to be an
independent contractor.”
The last part of your debate should come from the client’s
perspective. We know that one of the two major reasons for contracting with a
private investigator, is to (1) eliminate or reduce liability and (2) the
client needs the training and experience that the investigator is offering. Under
Labor Code Section 2750.5
and 3357, there is a rebuttal presumption that: "Any person
rendering service for another, other than as an independent contractor, or
unless expressly excluded herein, is presumed to be an employee."
What this means, is that
if one of the independent contractor workers does work for a client--let's say
an insurance company--and the worker gets injured or causes legal damage to
another party, the client is on the hook for workers'
comp. and other liabilities!
Click here if you want to read the California Dept. of Labor's informational guide of "Independent contractor versus employee"
Hope this helps!
Shaun Sundahl, Author of The California Legal Investigator. Available on Amazon and other bookstores.
*****************End of Argument************
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