Company Forcing Independent Contractors to Be Reclassifed As Employees

[saraforddvm]

My question involves independent contractors in the state of: California
I am a veterinarian with an S-corp. I have been providing services as an independent contractor to a hospital for 16 years. I have one employee who has been with me for 5 years. I have had three drs. previously employed over the 16 years. I was notified via conference call this week that the corporation who owns the hospital that I do the majority of my work is phasing out independent contractors and I must be reclassifed as an employee as does my employee. Is this legal? This has major negative tax implications as I pay my self a modest salary from my S-corp and write off many things that will certainly not be included in even the most generous benefit package like a company car. I do contract work for the university, several drug companies etc.

[PattyPA]

It is always legal to treat a worker who would otherwise meet the criteria for an IC, as an employee. It is just not legal to do the opposite. It's the company's option.