Independent Contractor Compliance Blog - by Collabrus™

California’s lawsuit climate is one of the worst in the nation, joining Alabama, Louisiana and West Virginia, according to a U.S. Chamber Institute for Legal Reform report released last week. 

This conclusion was based upon an annual survey asking 1,482 U.S. corporate lawyers, who represent companies with at least $100 million in revenue, to rank cities and states according to how hostile the courts and the legal environment is for employers. According to the report, two-thirds of the corporate lawyers ranked California near the top of the unfriendly list. 

Los Angeles County Superior Courts were considered the second-worst in the nation, behind Chicago. San Francisco was ranked as the sixth-worst in the nation in this survey.

Small to mid-sized businesses are more at risk than their larger counterparts

“California needs more jobs, not more lawsuits,” said Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, in Los Angeles. “With one of the highest unemployment rates in the country, California’s legal climate is discouraging new businesses and new jobs at a time when the state needs them most…(and) California’s small-business owners are the most affected by lawsuits…”

This is because the small-to-mid-size businesses do not spend the resources to protect themselves either with preventive expertise to avoid the violations from occurring to begin with, or have the resources to pay for top legal representation once a lawsuit is filed.

Larger companies often employ experts (either third party outside experts or full time internal experts) to protect themselves from these predatory lawsuits. In many cases, they can afford to stretch the litigation process out for several years then settle before actually going to trial.  Smaller companies can less afford the prolonged cost and distraction from running their business.

How did we get to this point?

Most businesses don’t want to be bothered with what they perceive as a minor, bothersome issue when they first engage contingent and contract workers. Therefore, they fail to take the proper actions to protect themselves. For example:

1. They don’t use a true expert to advise them on proper classification or on labor law issues.
2. They don’t properly document the working relationship or any actions during the course of the job.
3. They assume they don’t need to provide benefits to anyone they give the title of IC.
4. They don’t properly handle and documentation the end of engagement process.

This is because a new project is a time of excitement and promise. Everyone is happy and the honeymoon is full on. It’s not until later the troubles begin. But later it is too late to go back and do things right.

It doesn’t need to be that way.

You can’t travel back in time and get a “do over.” The time to protect your company is before the lawsuit is filed. The best way to protect your company is to engage an industry expert like Collabrus to make sure your contingent workers are properly classified.