Am I an Employee or an “Independent Contractor” under California law?
When a business needs additional help it has two options, it can hire an employee or it can hire another business. Additionally, some businesses only comprise a single person who provides specialized services. These one-man businesses may be referred to as “Independent Contractors.” When a business hires an employee, he or she is subject to California’s labor laws. Independent contractors are not. This creates an incentive for dishonest businesses to mislabel their employees as independent contractors. For more information about California Labor laws, click here.
Under California law, determining whether an individual is an employee or an independent contractor is different the corresponding federal standard. In its 2018 decision, Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court adopted the “ABC test,” for differentiating an employee from a contractor. Under the ABC Test, a worker is presumed to be an employee unless the employer can show that all three of the following conditions are satisfied:
- the worker is free from the control and direction of the hiring entity in connection with the performance of the work;
- the worker performs work that is outside the usual course of the hiring entity’s business; and
- the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
It is the second condition that may be the most important: a business cannot take portions of its work force, working on critical aspects of the business, and reclassify them as contractors. For example, a tutoring company cannot make its tutor’s independent contractors. But, that same tutoring company make be able to outsource its payroll to an outside contractor.
Note: that individuals are presumed to be an employee unless the ABC test is meet. This means it is for the employer to show that person is an independent contractor, not the employee.
Important Note: Certain app-based drivers are considered independent contractors despite the ABC test, for more information regarding app-based drivers click here.