Q: Am I classifying workers correctly?
I operate a wholesale distribution business in California (S-Corp). We sell product to grocery stores. I buy directly from a manufacturer and use independent distributors who directly sell to the grocery stores. The independent distributors purchase product from my company and pick it up from my warehouse on consignment. They then sell product to grocery stores, electronically turn in the invoices as payment for the products then they receive a check for the difference of what they sold it for minus the cost of the product.
There is a distribution agreement outlining each distributor's territory and accounts. They use their own equipment and set their own schedule. The accounts set the expectation of service for the distributors.
My understanding is being that they are working in direct sales with a distribution agreement with the possibility of profit and loss, I am correctly classifying these workers as independent operators and not employees.
A:
The determination as to whether workers are properly classified as employees or independent contractors involve facts that are not included in your post. While the factors you have stated suggest independent contractor status, a conclusion cannot be safely made without knowing many other facts. If you wish to avoid possible bet-your-company litigation over this issue, it would be wise for you to locate and consult with an employment law attorney who regularly advises employers about these kinds of issues.
Good luck to you.
Brad S Kane agrees with this answer
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