Many people choose to be an independent contractor because they are specialized, want more job flexibility, or want to work with multiple clients. These are all appealing aspects of being classified as an independent contractor. But there are also some potential pitfalls that could impact how you are paid and what benefits you are entitled to.
Classification as an Independent Contractor
Under California law, individuals who are classified as “employees” are entitled to certain benefits and protections under the California Fair Employment Housing Act (FEHA) and California Labor Codes. Employees are entitled to:
- Minimum Wage
- Overtime Pay
- Rest and Meal Breaks
Independent contractors are not entitled to these same benefits. For many independent contractors, the benefits of this classification outweigh possible downsides. But what about individuals who are misclassified as an independent contractor?
Many employers fail to properly classify workers as “employees” or “independent contractors”. Some employers also change employee classification to independent contractor in order to avoid having to pay payroll taxes and report withholding. Misclassification – be it intentional or not – is a violation of wage and employment laws, and may be a violation of your legal rights.
Employee vs. Independent Contractor
In California, an employer cannot simply state that you are an employee or independent contractor. Employers also cannot make you sign an agreement stating that you are one or the other and it be legally enforceable. The Labor Commission looks at a variety of factors to determine your classification if a dispute or suspected misclassification arises.
There is no set definition of “independent contractor” observed across all legal channels. However, in an effort to help prevent misclassification, California created what is called the “ABC Test”. The ABC Test was designed to help identify and properly classify independent contractors. In order to be classified as an independent contractor, all three of the following conditions must be met:
- The worker must be free from the direction and control of the “hiring entity” in connection to the performance of work.
- The worker must perform tasks that are outside of the usual course of business for the hiring entity.
- The worker must be customarily engaged in an independently established occupation, business, or trade. This must be of the same nature as what the worker is hired for.
Your classification as an employee or an independent contractor greatly impacts your wages, tax liability, and even the process of how you file your taxes.
If you have questions about independent contractor rights, or have been misclassified, contact For All Workers today to find out if you may be entitled to compensation.