Solo and small law firms are subject to the same employment laws as any other type of employer. Consequently, when you grow your firm by adding attorneys and staff you need to pay attention to several considerations.

First, will this new person be an employee or an independent contractor? The latter is not covered by almost all of the employment laws (with harassment being the notable exception) but misclassifying someone as an independent contractor can lead to serious liability, financial and otherwise. To make this determination, you need to understand which test applies. One is the “ABC” test, which is codified at Labor Code section 2775 et seq, which generally applies unless there is a statutory exception. Please note that this statutory scheme continues to be amended since it became effective in 2020, including last year and earlier this year. If the ABC test does not apply, the common law Borello test will.

Under both tests, the presumption is that the individual is an employee and the firm must prove they are an independent contractor if it wishes to classify them in that manner. Generally speaking, the ABC test is more difficult to satisfy (i.e., making the individual a bona fide independent contractor) because it requires meeting three conditions, including that the individual is performing work outside of the usual course of the firm’s business.

The ABC test applies to paralegals and assistants. It is unlikely that the ABC test can be satisfied for paralegals and assistants because they normally perform work within the usual course of the firm’s business.

The Labor Code specifically excepts attorneys from the ABC test, so the Borello test applies to them. This test requires application of multiple (many more than three) factors, with the key factor being the degree of control by the firm of the manner and means of accomplishing the work by the individual. Application is on a case-by-case basis and no single factor is determinative. Attorneys typically would be considered employees unless they have their own business and perform limited scope work for multiple firms.

A second consideration, assuming your new personnel are employees, is whether they are exempt or non-exempt. Meaning do certain wage and hour laws apply to them, namely overtime and meal and rest breaks? Lawyers fall under the “professional” exemption as long as they are paid a salary equivalent to at least two times the minimum wage (California or local jurisdiction, whichever is higher) assuming a 40-hour week. In contrast, paralegals and assistants likely are non-exempt but can be exempt if they meet the “administrative” exemption. This requires that they are paid the equivalent of at least twice the minimum wage for a 40-hour week and carry out the majority of their work by (1) exercising discretion and independent judgment; and (2) assisting the principal of the firm; performing work under general supervision along specialized or technical lines requiring special training, experience, or knowledge; or executing special assignments and tasks under general supervision. The discretion and independent judgment prong in particular is not likely met for paralegals and assistants.

A third consideration comes into play if your new employee will bring the number of employees up to five. If so, a number of employment laws will now apply to your firm. These include the Fair Employment and Housing Act’s prohibitions on discrimination and retaliation (but note that the FEHA’s harassment provision applies to all employers); the California Family Rights Act (family and medical leave, baby bonding leave, and military service leave); Pregnancy Disability Leave; Sexual Harassment Training for supervisors and non-supervisors; and, most recently, Paid Bereavement Leave.

Finally, there are a host of other considerations beyond the scope of this article. These include obtaining worker’s compensation insurance, tax withholdings on employee compensation, etc. That said, growing your firm brings many benefits and the various legal requirements should not be an impediment. Rather, make sure to get the information and help you need to take this exciting step with your firm.

Dean Royer is an Associate at Leoni Law, a labor and employment firm. Leoni Law represents clients before the state and federal courts, State Personnel Board, PERB, NLRB, mediations and arbitrations, and other boards and commissions.