Employees Versus Independent Contractors

Historically, most companies hired employees to perform all the necessary tasks related to the business. However, hiring an employee is expensive for a company because it must pay payroll taxes and often feels competitive pressure to provide employees with certain benefits, such as health and dental insurance. Moreover, employees are entitled to receive a minimum wage, and certain employees must be paid overtime wages. Employees are also covered by workers’ compensation insurance.

Independent contractors, on the other hand, are much less expensive for businesses to use. For example, a business can use independent contractors only when needed without worrying about paying for their benefits. While the use of independent contractors used to only be common in certain industries, that’s changed in recent years.

It is important for employees to understand that, while there are certain appeals to the independent contractor lifestyle, employers have been known to take advantage of workers by labeling them as independent contractors to avoid the additional expenses that come along with hiring employees.

California Law Pertaining to Independent Contractors

California is home to several very large and popular companies, which have largely caused the surge in independent contractors: Uber and Lyft. Thus, California is on the cutting edge when it comes to the distinction between employees and independent contractors. For example, in 2019, Governor Newsom signed Assembly Bill 5, or AB5, into law. AB5 was an effort to clarify the legal standard by which courts review an employer’s characterization of a worker as an independent contractor. More specifically, AB5 required the use of the “ABC test,” which considers,

• Is the worker free from the control and direction of the employer in terms of how they complete their assigned work?
• Does the worker perform tasks that are outside the usual course of the employer’s business?
• Does the worker “customarily engage in an independent trade?”

Unless the answer to all three questions is “yes”, they are to be considered an “employee” for the purposes of California employment law. This means a person would be entitled to all the rights and benefits of an employee.

Are You Involved in a California Employment Dispute?

If you believe that the company you are working for has unfairly characterized you as an independent contractor rather than an employee, the company may be in violation of California employment laws. At The Nourmand Law Firm, APC, we proudly represent workers and employers across all industries in a wide range of employment litigation. We routinely handle violations of the Fair Labor Standards Act, employment discrimination cases, and more. To learn more about the services we provide, and to schedule a free consultation, give us a call at 800-700-WAGE (9243). You can also reach us through our online contact form.

Under the new legal standard, California wage orders carry a presumption that any worker performing work for a business is an employee. As such, the law entitles these employees to the protection set forth by California Wage Orders. A hiring entity can only overcome the presumption if they can prove three elements:

• That the worker is free from the control and direction of the hiring entity, related to the worker’s performance and in connection with the parties’ contract;
• The worker is engaged in work outside the hiring entity’s usual course of business; and
• The worker is routinely engaged in an independently established trade, occupation or business, of the same nature as the work performed for the hirer.

This landmark decision is a win for workers, who are routinely incorrectly classified as independent employees. Mis-classified workers may face many issues related to labor standards, benefits, social safety nets, health and safety concerns, and tax implications. However, workers must understand that there are certain legislative exemptions to the ruling. Some exemptions to the test apply to workers in the music industry, performing artists, freelance writers, and certain insurance industry workers.

Further, in Vasquez v. Jan-Pro Franchising International, Inc., the court held that the Dynamex ruling should be applied retroactively. In that case, the defendant argued that the issue concerned an employment relationship before the Dynamex decision; therefore, the prior “right to control” test should be applied. The court reasoned that the Dynamex decision was an “authoritative judicial decision interpreting legislative measure”; therefore, the decision will apply retroactively to all nonfinal cases that predate the decision. Workers must understand that despite the ruling, they must file their cases expediently to meet the statute of limitations.

Contact a California Employment Law Attorney

If you face discrimination or other unfair employment practices by your employer, you should contact The Nourmand Law Firm. The attorneys at our law firm have extensive experience successfully advocating on behalf of individuals facing California employment law issues, including discrimination, wrongful termination, sexual harassment, wage-and-hour disputes, and mis-classification. Our dedicated attorneys are up-to-date on all relevant statutory and case law changes that alter the landscape of employment law in the state. We understand the devastating financial and emotional toll that employment discrimination and unfair labor practices can have on a worker. As such, we work to ensure that employers are held responsible for their illegal practices. Contact our office at 310-553-3600 to schedule a free initial consultation with a California employment attorney. You can also reach us through our online form.