The classification of a worker has many consequences for the individual and the company that either employs them or has contracted to benefit from their services. An employee has certain rights under the law that do not necessarily apply to an independent contractor. Independent contractors are self-employed professionals who negotiate contracts for projects with clients instead of relying on consistent employment with one company.
Many employers are happy to misclassify workers that they treat as employees by calling them independent contractors. Doing so saves the company money by reducing unemployment, workers’ compensation and tax obligations. If an employee realizes that a company has misclassified them, they could file a wage claim or seek benefits that the company previously denied them.
What is the difference between an independent contractor and an employee?
California has a simple test
The federal government has recently clarified nationwide standards for employees and independent contractors. There are multiple different factors that influence whether a company misclassified a worker who is actually an employee.
The situation is easier to manage in California, as there is a simple three-point test. The first concern is how much control a worker has over their daily work. If the business directly supervises and manages the individual, then they are likely an employee. Independent contractors do not require the micromanagement and oversight of an employer.
The second factor is whether or not the worker’s job responsibilities fall outside of the company’s usual business. If someone’s role is integral to standard business operations, they are likely an employee, not a contractor.
The third consideration is whether the worker actually maintains their own business or has established themselves as a professional in a certain trade. They should have a history of working independently and providing their own tools, training and resources to be an independent contractor.
Simply having a worker fill out certain tax paperwork and sign a contract designating them as an independent contractor is not enough to justify their classification. Workers that companies misclassified could have the option of taking the matter to court.
Worker misclassification can lead to wage claims because an employee has not properly received overtime pay or minimum wage. It could also lead to a number of employment law issues. Understanding what separates independent contractors from employees could help workers receive the benefits, protection and pay they deserve.