EmploymentQuestion 1100 of 1605
The safest overall approach for a contractor who wants to avoid inheriting employment liabilities (workers' comp, wages, discrimination claims) from lower-tier workers is to:
a.Verify that subcontractors are licensed and insured, keep proper records, and properly classify and treat its own workers as employees where the law requires
b.Label every worker an independent contractor
c.Pay everyone in cash and keep no records
d.Avoid carrying any insurance to save money
Explanation
Contractors reduce exposure by hiring only licensed, insured subs (so the sub's workers do not become the contractor's employees), keeping accurate records, and correctly classifying and covering their own employees. Cutting corners, such as cash payments, misclassification, or going uninsured, dramatically increases liability under Labor Code §2750.5, §2810.3, and workers' compensation law.
Law Reference: Labor Code §2810.3; §2750.5; joint liabilityPractice all 1605 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)