Homer, single & Marge, married with one child, are starting a business to provide computer consulting services, web design and software development. They will locate in Los Angeles, California. Homer is willing to contribute $50,000 to the business. Unfortunately, Marge has no money to contribute, but has the computer expertise, the essential contacts and is a graduate of the UCLA Anderson School. In fact, Marge already has two potential new clients, one located in Arizona. They hope to open a second office in Arizona within a few years. They would like to participate equally in making all decisions. They estimate that $100,000 will be enough money to pay all expenses for 12 months at which time they project that revenues will cover expenses. Homer and Marge plan on reinvesting most of the earnings with the goal of expanding and selling the business. They have decided on the name Virtual Construction, Inc., but will be doing business as "Vircon." Initially, they would like to hire two people, a web designer and a consultant. The consultant will work full-time for Vircon, have substantial decision making authority, will work at either the main office or at client sites, receive a salary and expenses reimbursed, use Vircon's equipment, and will not receive any benefits, such as medical insurance. The web designer will work from his/her home, use his/her own equipment, be paid hourly, may have other clients and will not receive any benefits, such as medical insurance. Both workers have written contracts indicating they are independent contractors.

-Is the Vircon consultant an independent contractor or an employee under the new ABC test in California (exclude the exemptions from your analysis)?

-Is the web designer an independent contractor or an employee under the new ABC test in California?

-What are the legal consequences of incorrectly characterizing them