Employees

While I have not yet hired any employees, I believe a sole practitioner’s first hire should be an administrative assistant – whether traditional or virtual. With everything a sole practitioner needs to attend to – printing, scanning, mailing, and other administrative tasks – should be delegated to an administrative assistant. The more these tasks are farmed out, the more time will be available for legal work. I recommend litigators open an account with FirstLegal or another filing and courier company.

A sole practitioner must be sure to properly classify the individual hired as an employee or independent contractor. Employers must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee, but not on wages paid to an independent contractor.
(See www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F.)  In addition, California Labor Code section 226.8 imposes penalties of $5,000 to $15,000 for willfully misclassifying an employee as an independent contractor; the penalty for each violation increases to $10,000 to $25,000 if the employer is engaged in a pattern or practice of willful misclassification.

The California test and the federal test to determine whether a worker is an employee or an independent contractor differ in some cases. In California, the right of direction and control, whether or not exercised, is the most important factor in determining an employment relationship. At the federal level, the test to determine whether a worker is an independent contractor or employee requires considering behavioral control, financial control, and relationship of the parties. (See www.taxes.ca.gov/iCorE.bus.shtml#Federal.)

Before hiring your first employee, it may be a good idea to consult an employment attorney for further information, and perhaps a more senior attorney for an exemplar employment agreement. My accountant recommended Paychex for handling payroll.