What is the Difference Between an Independent Contractor and an Employee

Are you an independent contractor or an employee? You may be surprised to learn that just because you signed an “independent contractor agreement” or received a 1099 form rather than a W-2 form that does not necessarily mean you are an independent contractor. In fact, if your employer characterizes you as an independent contractor when you are really an employee, and if you do not get paid overtime, your employer may be violating several labor code sections.

Knowing your classification as an employee is important because California’s wage and hour laws and anti-discrimination and retaliation laws protect employees, but not independent contractors. For example, wage and hour laws usually only pertain to issues like regular and overtime rates, entitlement to meal and rest periods, maximum work hours, etc. So, independent contractors are not entitled to those by law. Employees can file a civil action or go to state agencies such as the California Division of Labor Standards Enforcement (DLSE) and file complaints. But, independent contractors must go to court to settle their disputes or enforce other rights under their contracts.

So how do you know whether you are an independent contractor or an employee? Your employment classification will depend on the facts surrounding your relationship with your employer. In most situations in California, the determining factor is the amount of “control” or “Borello test”, which is applied to determine whether a worker is an independent contractor or an employee. This test was adopted as a result of the decision by the California Supreme Court in the 1989 case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations. There are many factors used in this test, the most important and significant being whether the person to whom service is rendered has control or the right to control the worker. The person to whom service is rendered is the employer or principal. This right to control is considered both as to the work done and the manner and means in which it is performed.

Other factors considered are:

– Whether the contractor is engaged in an occupation or business distinct from that of the principal;
– Whether the work performed is a part of the regular business of the principal or alleged employer;
– Whether the principal or the worker supplies the tools and the place for the person doing the work;
– The contractor’s investment in equipment or materials required to perform the task or his or her employment of helpers;
– Whether the service performed requires any special skills;
– The kind of occupation, and whether the work is usually performed under the direction of the principal or by a specialist without supervision;
– The contractor’s opportunity to make a profit depending on his or her managerial skill;
– The duration of time the services are to be performed;
– The length of the working relationship;
– The method of payment, whether by time or by the job; and
– Whether or not the principle and employee/contractor believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

If your employer has misclassified you as an independent contractor and as a result you are not being paid any overtime, you can either file a wage claim with the DLSE or you can file an action in court to recover the lost overtime premiums. Regardless of which route is taken, the first issue that will have to be addressed will be the determination of your employment status as either an employee or independent contractor.

2017-12-13T21:46:46+00:00 July 7th, 2014|General Labor Law|