Are You Being Misclassified as an Independent Contractor?

It’s more than just a label – the distinction between an employee and an independent contractor is an important one. Employees have specific rights and protections that independent contractors do not enjoy. Unfortunately, employers often misclassify employees as independent contractors in an attempt to get around certain obligations that they have to their employees. It can be incredibly difficult to untangle when an employee has been misclassified, but an experienced employment law attorney can help. 

Employees Versus Independent Contractors

Understanding the difference between these two types of employment status is vital to understanding your rights. As the marketplace and businesses evolve, it can sometimes be difficult to tell the difference between an independent contractor and an employee. That said, identifying a few key characteristics can help. 

Employees are hired by a business or similar enterprise to perform the same work for their employer over and over again for an indeterminate period of time. Their work is typically related to a core function of the business, such as how a waiter’s work would be related to a restaurant’s business of providing food to customers. In addition, the employer exercises control over the employee’s hours, wages, and working conditions. 

Independent contractors, on the other hand, work for themselves. They typically have a temporary relationship with the employer limited to a specific job or task. Some other factors include the following: 

• They control where, when, and how they perform their work.
• They provide their own tools, equipment, or other materials.
• They may work for multiple employers at the same time.

Why Employees Are Misclassified as Independent Contractors

Unscrupulous employers may misclassify employees for a number of reasons, but they generally all come down to the same thing – independent contractors do not enjoy the same rights as employees do. For example:

• Employees can pursue legal claims against their employers for wrongful termination, whereas independent contractors cannot. 
• Independent contractors are not entitled to minimum wage, overtime pay, or meal breaks. 
• Independent contractors do not receive the same benefits as employees such as health insurance or paid time off. 

Employers are also relieved of various financial obligations when dealing with independent contractors such as payroll taxes, workers’ compensation coverage, and unemployment insurance. In short, independent contractors are cheaper for employers and easier to terminate. 

Have You Been Misclassified?

If you are wondering if you have been misclassified as an independent contractor, you should be aware that there are several tests used by the courts that will determine whether or not you should be considered an employee. While these tests are each different, they all tend to focus on the same key factor: the degree of control that the employer exercises over the worker. The more control the employer has over the worker, the more likely the worker will be considered an employee and not an independent contractor. Another factor that will be considered is whether the work performed by the worker is a part of the employer’s usual course of business. 

The circumstances of your case will determine which test is applicable, but the “ABC” test is the most commonly used test in California. 

Understanding the ABC Test

Under California law, there is a presumption that every worker is an employee and the burden is on the employer to prove that they are an independent contractor when challenged. In order to meet this burden, the employer must meet the three requirements of the ABC test: 

1. Autonomy. The worker is autonomous, meaning that they are largely free to determine how the work is to be performed. In other words, they are not under the control and direction of the employer. 
2. Business dissimilarity. The work provided by the worker falls outside of the employer’s core business activity. For example, an electrician who is hired to repair and replace the electrical wiring throughout an apartment building would satisfy this requirement. 
3. Custom of the worker. The worker must be customarily engaged in an independently established trade of the same nature as the work performed for the employer. In other words, the worker is primarily in business for themselves. It is not sufficient for the employer to show that they did not prevent the worker from independently establishing a business. 

Again, the employer must meet all three requirements in order to demonstrate that the worker is in fact an independent contractor. To use the example of the electrician working for the apartment building, the electrician would be considered an employee if the employer dictates the hours that they work and pays them an hourly wage or if the electrician works solely for the apartment complex. 

Ultimately, workers need to understand that signing an independent contractor agreement or receiving a 1099 isn’t determinative of whether or not you are an employee. And while the ABC test may sound straightforward, it can be rather complex in real-world applications. If you believe that you have been misclassified as an independent contractor, the best thing to do would be to speak with an employment lawyer who has experience in handling misclassification cases. 

Exceptions to the ABC Test

There are many occupations that are exempt from the ABC test, including the following: 

• Insurance professionals
• Licensed professionals such as lawyers, architects, accountants, and engineers
• Securities professionals such as investment advisors and registered broker-dealers
• Professional service providers such as marketers, travel agents, freelance writers, or graphic designers

There are many more exceptions. If one of these exceptions applies to your occupation, the misclassification question then shifts to the Borello test. The Borello test focuses on the “totality of the circumstances” with an emphasis on how closely the employer controls the worker. 

Contact Attorneys for Employees if You Think You Have Been Misclassified

Employees who have been misclassified as independent contractors may be entitled to unpaid wages, benefits, interest, and any attorney’s fees incurred in pursuing your claim. If you believe that you have been misclassified, contact Attorneys for Employees by calling 310-601-1330 to discuss your case. We can help you get the compensation you deserve.