Here is what you need to know. I am happy to consult with you on this further and work up, design and help you implement this restructuring. This would include consultation, drafting communication templates or employee agreements tailored to your industry and answering any additional questions you may have about the steps I have outlined below. Good luck! California is tricky!

1. Understand the Law (most important) always try to consult with an attorney, if possible.— ABC Test

California’s law presumes workers are employees unless you prove all three of these conditions:

(A) The worker is free from your control and direction.
(B) The work is outside the usual course of your business.
(C) The worker is engaged in an independently established trade or business.

If these aren’t all true, the worker must be classified as an employee.

2. Audit Your Current Contractors
Review contracts, job roles, and how work is assigned.
Identify contractors who do work integral to your business or under your direction.
3. Plan the Transition

Decide which contractors must become employees based on the ABC test.

Determine appropriate job titles, pay structures (hourly or salaried), benefits, and policies.

4. Create Employee Agreements and Onboarding
Draft new employment agreements covering wages, hours, benefits, confidentiality, and company policies.
Set up payroll with tax withholding, workers’ comp, and benefits enrollment.

Conduct onboarding like any new employee — training, paperwork, etc.

5. Communicate Clearly
Explain the changes to affected contractors clearly and professionally.
Highlight benefits like protections, benefits, and stability.

6. Adjust Internal Policies

Update your HR policies to reflect employee status (leave, accommodations, discipline).
Ensure time tracking and payroll systems are in place.

7. Monitor Compliance
Keep up with California labor law updates and consult legal or HR experts as needed.
Bonus Tips
Consider hybrid models where possible (e.g., part-time employees or casual workers).

Use written contracts that clarify control and independence for remaining contractors.

Avoid “misclassification” fines by erring on the side of employee classification when in doubt.