How do I know if I am an independent contractor or employee?

How do I know if I am an independent contractor or employee?

| Jul 11, 2019 | Wage & Hour |

It is vital for your employer to properly classify you. If your employer falsely calls you an independent contractor when you actually meet the requirements of an employee, your employer is able to avoid complying with employment laws regarding the minimum wage, overtime, payroll taxes or meal and rest periods.

According to the State of California Department of Industrial Relations, there are many factors to consider when determining employee classification:

  • Whether your employer has control or the ability to control the way you do your work.
  • Whether your duties are an essential part of the business’s operation.
  • Who provides the tools, instruments and place for performing your work.
  • Whether your duties require you to have a special skill.
  • The level of the permanence of the worker-employer relationship.
  • Whether your employer pays you by job or time.

There is no concrete definition of an “independent contractor” and none of these factors are controlling by themselves. For these reasons, the Division of Labor Standards Enforcement has traditionally applied the “economic realities” or “multi-factor” test.

More recently, in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018), the California Supreme Court adopted the “ABC” Test.  Under the ABC Test, a hiring business that chooses to classify an individual as an independent contractor now bears the burden of showing that the classification is proper under the ABC Test. To do so, the hiring business must prove each of the following three factors:

  1. that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. that the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Over 20 states already use some form of the ABC Test, but many of them use the test for only specialized determinations. In California, however, the California Supreme Court ruled that the ABC test should be widely applied for inquiries under the California Wage Orders (which are regulations that implement many of California’s employee-protection laws) as to whether a worker is an employee or independent contractor.

It is important to note that the way the person you work for pays you does is not determinative of your classification. Even if this individual or company does not make any withholdings or deductions for taxes and issues you an IRS Form 1099, it does not guarantee your status as an independent contractor. Your employer cannot change your status illegally.

Additionally, the presence of a written agreement establishing you as an independent contractor is not determinative. The facts behind the agreement and the nature of your relationship is what determines your status.

This information is general and does not constitute legal advice.