Independent Contractors in California

Today, over 53 million people are classified as independent contractors, but many of these workers have been improperly identified.  Why is this? Unfortunately, employers frequently stand to save money by misclassifying their employees as independent contractors, as it means they don’t have to provide as many benefits and protections.

What’s the difference between an independent contractor and a regular employee?

Independent contractors have, in theory, more “independence” than standard employees.  The usual definition of an independent contractor is someone who is in business for him or herself, and not for an employer or supervisor.  Traditionally, independent contractors decide when and where they work, set their own fees, have multiple clients, have their own tools/materials, provide skills or expertise that is not part of a company’s usual repertoire, etc.

In other words, an independent contractor is his or her own boss.  A company might hire an independent contractor to perform work for the company, but that doesn’t necessarily make the contractor an employee of that company.

When determining whether or not a worker is an independent contractor or an employee, it is important to see how much control a company has over the worker; the greater the control, the greater the likelihood the worker should be classified as an employee.  The greater the independence, on the other hand, the greater the likelihood that the person is a contractor.

However, despite having greater autonomy, independent contractors don’t enjoy the same rights under California law as employees.  They can be fired far more easily, and aren’t entitled to overtime pay or even the minimum wage.  They may be required to work long, unbroken hours without extra compensation.

They are ineligible for unemployment insurance, and they are not protected federal and state antidiscrimination laws. Employees, on the other hand, are protected by state and federal law: they must be paid at least the minimum wage, they are entitled to receive overtime, and they’re eligible for unemployment insurance.  Other benefits and protections available to employees but not to independent contractors include:

  •         Retirement and health benefits
  •         FICA tax payments
  •         Workers compensation insurance

Essentially, being misclassified as an independent contractor when you are performing the work of an employee is a serious violation of your rights.  Such a misclassification has the potential to deprive you of substantial wages, not to mention basic employee rights.

How do I know if I’m an independent contractor or an employee?

You are probably an employee if:

  •         You are paid by the hour
  •         You work full-time for the company
  •         You are closely supervised by the company
  •         You received training from the company
  •         You receive employee benefits
  •         Your company provides the tools and equipment needed to work
  •         The services you provide are an integral part of the company’s business
  •         You are permanent (the more permanent you are the more it looks like you are an employee)

While these are useful indicators, you do not need to meet all of the above factors to be an employee.  Please contact an attorney to be sure of your classification.

You are probably an independent contractor if:

  •         You are paid by the job
  •         You set your own working hours
  •         You provide the tools and equipment needed to do your job
  •         You work for more than one company at a time
  •         You pay your own business and traveling expenses
  •         You hire and pay your own assistants
  •         You can earn a profit or suffer a loss as result of your work for the company
  •         You operate a truly independent business

If you have questions about whether or not you qualify as an employee or an independent contractor under California law, please contact us for a consultation.  The distinction is not always clear cut, and many employers take advantage of the ambiguity around the two classifications in order to avoid their obligations.  One of our experienced San Francisco employment attorneys will be able to advise you as to your status and recommend a course of action if you’ve been misclassified.

Which industries have been hardest hit by independent contractor misclassification?

Independent contractor misclassification occurs across all industries, but some are more prone to it. A study on independent contractor misclassification by NELP (National Employment Law Project) explains that the following industries tend to have higher rates of independent contractor misclassification:

  •         Construction
  •         Technology and Computers
  •         Real Estate
  •         Drivers
  •         Janitorial
  •         Home Care

A recent and very prominent example of the employee vs. independent contractor misclassification debate is that of Uber, the San Francisco based driving service.  Uber has always maintained that its drivers are independent contractors, because they drive their own cars, set their own hours, and are not supervised on the job.

Many states have upheld Uber’s classification when it has been disputed by drivers.  However, California’s Labor Commissioner recently ruled that Uber drivers should be classified as employees.  Why?  Because Uber provides them with equipment (namely iPhones), monitors their performance via customer reviews, sets fees and pay rates without input from the drivers, and did not hire the drivers due to any specialized or unusual skill.

What can I do if I’ve been misclassified?

Independent contractor misclassification can be extremely costly to you. Often, misclassified employees are owed thousands in overtime pay or unpaid minimum wages.  Because one factor alone does not determine your status as an employee or independent contractor, determining your true classification can be tricky. The courts look at all the relevant details to determine the appropriate classification and, even then, disagreements may arise.

If you suspect that you have been improperly classified as an independent contractor, you could be entitled to recover damages. Please contact us for a free consultation.  One of our employment attorneys will be able to discuss your misclassification and address your options.