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Employee vs Independent Contractor in California

It is common practice for a worker, regardless of true legal status, to be misclassified as an independent contractor for a variety of reasons. An employer may avoid paying certain state and federal taxes or fees by characterizing individual workers as something other than “employees” as well as circumventing many civil rights and employment laws or regulations. According to the Internal Revenue Service and the United States Governmental Accountability Office, millions of workers are misclassified as independent contractors annually, costing the federal government nearly $3 billion dollars each year.

In California, state-level agencies concerned with this issue include the Employment Development Department; the Division of Labor Standards Enforcement; Division of Workers’ Compensation; Franchise Tax Board; and the Contractors’ Licensing Board. Additionally, the United States Internal Revenue Service and Department of Labor are concerned about these national trends regarding all types of workers. It is generally true across the board in California that most workers are presumed to be employees, but a court may look to a variety of factors in determining whether a worker has been misclassified as an independent contractor.

The “economic realities test” adopted by the California Supreme Court is very similar to that applied nationally by the United States Supreme Court and initially looks to ascertain who controls the manner in which the work at issue is performed. If an employer exercises control over all or most factors, the court is likely to determine the individual at issue is truly an employee that has been misclassified as an independent contractor.

Among factors considered are hours of work, dress codes, performance criteria, tools, special skills, whether the worker is exclusive to the employer or has other “customers”, the length of time involved in performing the work, the method of payment (hourly vs. “by the job”), and whether the parties agree on the characterization of the relationship. A court will weigh each of these, and potentially other, considerations to determine whether a worker has been misclassified as an independent contractor. Much is at stake for all parties concerned, including but not limited to unemployment and Social Security benefits for workers as well as compliance issues for employers.

If you feel you’ve been illegally misclassified in California as an independent contractor, contact the employment lawyers at CounselOne today for a free consultation.

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