Independent Contractor vs Employee? Employees have many different legal protections than independent contractors. Using an independent contractor can relieve an employer of the many burdens that California and Federal laws impose on an employer. For example, an employer is not obligated to provide overtime compensation or workers’ compensation for independent contractors.
However, simply labeling an employee as an independent contractor does not alleviate an employer’s legal obligation owed to an employee.
Yet, mislabeling employees as independent contractors happens. Sometimes, it’s because the employer doesn’t understand the legal distinction between the two. Other times it’s an intentional mislabeling to alleviate the employer of fulfilling the many legal obligations owed to employees.
When an employee is misclassified as an independent contractor, there may be several rights that, as an employee, you were entitled to.
What is an Independent Contractor?
Independent contractors are people who work for themselves. They don’t report to a supervisor or boss, and they don’t have obligated work hours. Independent contractors have flexibility in that they can work on multiple projects for different clients simultaneously. Typically, they set their own fees and are contracted to perform a specialized skill that is not part of the company’s regular business. Independent contractors have their own workspace and provide their own tools and equipment.
In essence, independent contractors cannot be created by having a person sign an agreement to be one. They are freelancers, choosing when, where, and how they perform work. Even when a client provides specifications and deadlines for work, the independent contractor decides how much time to allow for the particular project.
What is an Employee?
Unlike an independent contractor, an employee doesn’t have the same flexibility. A company exerts much more control over an employee, setting work hours and even workspace at the employer’s place of business.
An employer also regulates how the employee is to do their job, often providing training. Employees will report to a supervisor, who ensures that the work’s quality follows the work-product or service expected by the employer. When an employee fails to perform by the guidelines and expectations, the employee can be subjected to disciplinary action.
The company’s control over how the employee performs the work comes at a cost. In return, the employee receives many legal benefits that an independent contractor is not entitled to.
What Rights Are Employees Entitled To?
California and federal laws protect employees by requiring employers to maintain minimum benefits. Among other things, the following rules apply to employees but won’t necessarily apply to independent contractors:
- Employers must withhold state and federal payroll taxes for their employees.
- If an employee is injured in an incident relating to the job, they are eligible for workers’ compensation.
- If an employee loses his or her job, they are eligible for unemployment insurance benefits from California.
- Employees are entitled to wage and hour protections, including minimum wage and overtime, as proscribed by California and federal laws.
- Employees are protected under federal and state anti-discrimination laws and are entitled to meal breaks.
- Employees are entitled to take family or medical leave in specific situations, like losing a loved one or a severe health condition.
California Test to Determine Classification an Employee: Assembly Bill 5 and the ABC Test
The law in California presumes that a worker is classified as an employee. That means that it’s not the worker’s responsibility to prove they are an employee. Instead, the employer maintains the obligation to verify that the worker is not.
Under Assembly Bill 5 (AB 5), which became effective on January 1, 2020, the “ABC Test” is used to determine the classification. The ABC test stands for the following:
- (A) Autonomy. How the worker performs must be free from the control and direction of the employer.
- (B) Business Dissimilarity. The worker performs labor or service outside the usual course of the hiring entity’s business.
- (C) Custom of the Worker. The worker must be customarily engaged in an independently established trade, occupation, or business of the exact nature as that involved in the work performed.
What If I Have Been Misclassified?
Suppose you believe that you are actually an employee but have been incorrectly classified as an independent contractor. In that case, you may be entitled to certain protections under the law. For example, if you worked more than eight hours in a day or 40 hours in a week, your employer may be liable for unpaid overtime and penalties for missed meals and rest breaks. For more information on pursuing a wage and hour claim or to speak about the specifics of your situation, our experienced employment lawyers offer free consultations at SANFORD A. KASSEL, A Professional Law Corporation, or call us today at 909.884.6451.
