The way your employer classifies you affects their obligations and your rights. As an employee, you have the protection of certain laws and specific workplace programs, like workers’ compensation and unemployment insurance. As an independent contractor, you are self-employed and have fewer systemic protections.
When your employer first hired you, they may have informed you that it was a position only for independent contractors and had you fill out a 1099. However, you believe that they treat you like an employee and that you should have filled out a W-2 instead.
What is the difference between an independent contractor and an employee in California?
The state applies the ABC test to independent contractors
To determine if someone is an independent contractor or an employee, the state looks at their work conditions. To be an independent contractor, the worker must meet three qualifications, which the state calls the “ABC test.”
The worker must be free from control and direct management regarding the performance of the work. More importantly, the work that they perform must be outside of the scope of the company’s usual course of operations. The worker should have their own small business and provide all their own supplies and support.
Sometimes, a worker meets one or two of those criteria but not all three. A remote worker who does their job on their own schedule and on a computer they purchased themselves may still be an employee if their work directly relates to the company’s primary operations and they are subject to certain kinds of micromanagement.
What can you do about misclassification?
If you believe that you are an employee but you have filled out tax paperwork as an independent contractor, you could potentially lose out on certain rights. Contractors can’t claim overtime pay, workers’ compensation benefits or unemployment, in most cases. You also have to pay more in tax because your employer doesn’t contribute their fair share.
Some workers are able to have their employer change their classification when they point out that it is incorrect. Others may need to initiate legal proceedings because the company doesn’t change its practices or retaliates against them for pointing out the problem. Understanding your rights as a worker can help you stand up when your employer infringes on those rights.