Independent Contractor or Employee?
Many companies hire independent contractors to do any number of tasks, from running weekly payroll to providing copywriting services. Typically, independent contractors are a lot cheaper to hire than full-time employees, as employers are not required to offer independent contractors benefits, they are not restricted to offering a set amount of hours, they do not have to pay overtime, and they do not have to pay additional employee overhead. Furthermore, independent contractors seem to be more productive than traditional in-house employees, as they get to choose their work hours, make up their own rules, and are not subject to typical office distractions. Moreover, employers only pay independent contractors for work they do, and not simply for being present.
However, because independent contractors provide so many perks for employers, many employers wrongfully classify new-hires—some as an attempt to avoid the high costs of another in-house employee, and some simply because they do not understand California law regarding independent contractors. Whatever the reason for misclassification, if your company routinely works with independent contractors, it is extremely important that you know the difference between an employee and a contractor as defined by California employment law.
California’s Definition of Independent Contractor Differs From Federal Definition
According to CA.gov, an individual is an independent contractor in the state of California when “they have the right to control the manner and means in which [they] carry out the job.” If you, the employer, maintain most of the rights to direct and control the worker, or if you can discharge the worker at will and without cause, then the individual whom you hired is considered an employee. If you are not sure who holds more power of the manner and means with which work gets done, consider these ten secondary factors:
- Does the worker own his or her own company for which he or she hires employees, invests in equipment, offers specialized services to the general public, and works for more than one company or firm at the same time?
- Does the worker perform his or her work without supervision?
- Does the work require skill and specialized training?
- Does the worker perform the work themselves, or have someone else perform the work on his or her behalf?
- Does the worker provide his or her own equipment, tools, and supplies?
- Does he or she perform the work in your office, or on their own chosen premises?
- Are the services provided on a long-term basis?
- Is the worker paid based on time worked or projects completed?
- Are the services an integral part of your business?
- Does the worker know they are being hired as an independent contractor?
- What is your extend of control?
- Is the work performed for the benefit of your business?
When determining whether you entered into an employer-employee agreement or a business-contractor agreement, heavily and honestly consider each of the above factors. If you misclassify an employee as an independent contractor, you can be liable for unpaid overtime, unpaid benefits, missed meal periods, unpaid taxes, and several penalties and fines.
Let a Business Attorney Help You Draft Employee and Contractor Agreements
To avoid any hassle and backlash that may result from misclassifying an employee, work with a San Francisco business lawyer to draft your employee and independent contractor agreements. An attorney can provide you with comprehensive employment law support, so that you and your associates can stay out of trouble when working with independent contractors and new-hires. To consult with a business attorney today, contact Garcia & Gurney, ALC at 925-468-0400 or online today.