Misclassification: Independent Contractor vs. Employee

Under the California Labor Code, workers are presumed to be employees, not independent contractors. This means that the employer has the burden of proving that a worker is an independent contractor, rather than an employee. Even if an individual signs an agreement stating that she is an independent contractor, that agreement is not necessary determinative of the worker’s status as an independent contractor. Rather, the court (or the IRS) will look to several factors to determine whether the individual is an employee, or an independent contractor. These factors include:

Control: If the employer exercises complete control over the way that the worker does the job, such as how and when they do the work, then that individual is an employee. Independent contractors control the way in which they do their work.

Supervision: Employees typically work under supervision, while independent contractors generally do not.

Training: Employees are trained by the employer to do things in a certain way, but independent contractors are not trained by the employer.

Equipment: Employees generally use the employer’s equipment to do their work (computer, desk, phones, software, email, etc.), but contractors bring their own equipment, tools and supplies.

Who does the work: Employees do their own work, but independent contractors can contract with others to perform the work.

Pay: Employees are paid on set dates in set amounts, but contractors are paid by the job.

Some employers misclassify workers to avoid the obligations that come along with hiring an employee.  For example, independent contractors are not covered by workers’ compensation or unemployment insurance, payroll taxes are not withheld, and certain laws (e.g., the Labor Code, anti-discrimination laws)  do not apply. The consequences of misclassification can be significant and costly for employers, who may be subject to significant liability and penalties. If you believe you are misclassified as an independent contractor, contact us.