In recent years many employers have begun to designate some, and sometimes all of their workers as “independent contractors” rather than as “employees.” The main differences are that employees are paid regular paychecks with tax withholdings, must be paid minimum and overtime wages, must be reimbursed business expenses, and are entitled to the other protections afforded by employment laws (and in most cases, are also eligible for benefits offered by their employer like workers compensation, vacation pay, health insurance, holidays, sick pay, pension benefits)
Independent contractors, on the other hand, are paid as if they are operating their own business; i.e., they do not have deductions made from their pay, and have to pay both the employer’s and employee’s share of taxes. Independent contractors are also generally not provided any benefits offered by the employer, are not guaranteed minimum and overtime wages, are not protected by workers compensation, and are afforded no protection by employment laws.
While treating workers as independent contractors is legal in some circumstances, some employers have illegally labeled employees as independent contractors because they are seeking to save money by not paying things such as: 1) workers compensation insurance, 2) payroll taxes, 3) minimum wage or overtime premium compensation, 4) business expenses (such as mileage on a vehicle and specialized equipment,) and 5) benefits such as health insurance and 401(k) contributions. Where the independent contractor designation is illegal, the workers who are really employees can recover damages and/or restitution for what they should have been paid and for the value of the benefits they should have been provided.
In California, there is no single factor that determines whether a worker is an employee or independent contractor. Simply labeling someone as independent contractor does not mean that the person is not really an employee. Just because a worker agrees he or she is an independent contractor, or a written contract says so, does not mean that the person is really an independent contractor. Instead, a judge or jury has to evaluate the entire employment situation, before it can be legally determined whether the person is really an independent contractor or an employee. There are many factors which are considered, and the weight given to each factor can vary depending upon the circumstances of the case. Ultimately, the answer depends on job characteristics unique to the individual (in a single case) or group of workers (in a class action case). Some examples include:
- a maid who works in many different houses might be an independent contractor to each homeowner, but a maid who only has one job, and works 3 or 4 days per week in one home would be considered an employee;
- a full-time driver for a courier company or a van shuttle driver is generally an employee;
- an outside salesperson who works full time for a company is an employee;
- people who work full time for companies in company offices are almost always employees.
Pope, Berger & Williams enforces individual worker’s rights in this regard, and prosecutes class actions for large numbers of mis-classified employees. Pope, Berger & Williams also helps companies to evaluate their workforce to make certain this potentially huge exposure is avoided, defends companies from such claims, and coaches companies to transition to legal job classifications without creating claims by such independent contractors.