It is important for Pleasanton businesses to properly classify workers as while classifying a worker as an independent contractor may be more cost efficient upfront, properly classifying a worker will help avoid a lawsuit as well as significant risk of liabilities and penalties relating to treating a worker as an independent contractor only to later have him or her be found to be an employee.

How to Classify Your Workers

While there is no set definition of an independent contractor, the actual determination of a worker’s classification depends on several factors, known as the economic realities test, all of which must be considered, but none is controlling in and of itself. The mere fact that a worker is issued a 1099 as opposed to a W-2 is not determinative. Some of the factors include:

  • The employer has control or the right to control the how the worker performs the work and the manner and means in which it is performed;
  • The individual performing services is engaged in a business or occupation different from that of the employer;
  • The work is part of the employer’s regular business;
  • The employer or the worker supplies the tools, instruments, and the place for the individual doing the work;
  • The worker’s investment in materials or equipment required by the task or the employment of assistants;
  • The method of payment is by the time or by the job; and
  • The services provided require a specialized skill;

Other factors include the type of occupation and whether it is usually performed in the locality under the direction of an employer or by a specialist without supervision, the worker’s opportunity for profit or loss depending on managerial skills, the length of time during which the services are to be performed, and if the parties believe they are creating an employer-employee relationship.

The existence of a written agreement purporting to establish an independent contractor relationship is not determinative of classification, but helpful.

Legal Help With Employment Misclassification

The experienced Pleasanton employment law attorneys at Garcia & Gurney, ALC have comprehensive knowledge of state and federal employment laws and are prepared to provide you with accurate guidance on any employment matter. Misclassification of a worker can result in liabilities for owed wages, overtime, missed meal and rest breaks, payment of unpaid payroll taxes, disability insurance, workers’ compensation insurance, and unemployment insurance. Call 925-468-0400 or click here if you have any questions regarding your California business to schedule your initial consultation with one of our attorneys.

The information contained in this article is provided by Garcia & Gurney, ALC (“G&G") and is provided for educational and informational purposes only and should not be construed as legal advice or an offer to perform services on any subject matter. Recipients of this article should not act or refrain from acting on the basis of any information included in this article without seeking appropriate legal advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. G&G expressly disclaims all liability with respect to actions taken or not taken by the recipient based on any or all of the information or other contents in this article. This article not intended to constitute an advertisement for professional services or any other services. Nothing herein is intended to create an attorney-client relationship and shall not be construed as legal advice.