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Independent Contractors v. Employee
Frequently Asked Questions - Am I an Independent Contractor or Employee?
The company I work for pays me as an independent contractor, is this legal?
Maybe. The are legitimate reasons why workers, service providers, consultants might need to work as independent contractors and employers might prefer these contract arrangements to hiring part-time or full-time employees. Under California law, the presumption is when you work for a company you do so as an employee. The truth is many independent contractor relationships are simply employee-employer relationships in disguise. Maybe you benefit, maybe you lose...alot.
The company said it's in my best interests to be paid as an independent contractor; Is this true?
Typically not. If you're in business for yourself and take advantage of the tax planning and deductions available to self-employed individuals it could be advantageous. However, more often the employer is benefiting more by saving the expense for employment taxes, health and insurance benefits, vacation and holidays, retirement plan contributions, and other employee costs. Additionally, unemployment insurance benefits and workers compensation are designed to protect employees. More, most of the important employment rights laws have been enacted to protect employees, and not contractors.
If I signed an independent contractor agreement am I stuck with this classification?
No. The law will look past the agreement of the parties and independently determine the appropriate legal classification based upon the actual working relationship of the parties. However, the agreement may be relevant to show what the parties intended, and who has benefiting by the arrangement.
What test is used to determine employee v. independent contractor status?
There are different tests depending on who's testing and why. The Internal Revenue Service has used a 20 factor test to determine who's an employee for payroll tax purposes. The California Labor Commission and Employment Development Department use a different approach, which is more interested in the economic realities of the relationship. The Courts often focus on "control" - does the employer have the right to exercise control over the workers efforts and what is ultimately produced?. This might seem like a simple test but it is actually quite complex in its different applications. An experienced Employment or Business Attorney should be consulted to assist in this determination. Excellent information is provided in a pdf article by our SF Bar Association here: (https://www.sfbar.org/forms/jdc/emp-ic-memo.pdf)
I was mis-classified as an independent contractor in my former job, what can I do about it?
There are several options to consider and the questions include, "how you where harmed" and "what you're looking as to correct the past". The options might include filing for with the California Employment Development Department, alerting the CA Workers Compensation Division, filing with the CA Labor Commission, or even as for a determination by the Internal Revenue Service and/or Department of Labor. You should discuss these options with a qualified attorney before making any decisions.
There are relatively new laws in California, Labor Code Section 226.6-8 & 2753 which amy impose severe penalties upon employers who willfully mis-classify employees as independent contractors. In addition, employees so mis-classified my seek retroactive compensation for loss of overtime pay, meal breaks, and other form of benefit and compensation they were denied whether the employer's misclassification was willful or not.
Employment Law Practice
THOMAS C. WALKER, ESQ.
3000 El Camino Real, Suite 20o
Palo Alto, CA 94306
THOMAS C. WALKER, ESQ.
4990 Hopyard Road, Suite 100
Pleasanton, CA 94588
For legal advice, consult your lawyer (or hire me) ! This is general information only; not guidance for your particular situation.