Whether a worker is an "employee" or an "independent
contractor" makes a big difference. Under California contractors
law, independent contractors are not entitled to many benefits
that must be offered to employees, such as overtime pay, health
and pension benefits, social security credits, protection against
discrimination, and unemployment insurance. Some employers wrongly
classify their workers as "independent
contractors" to avoid providing those benefits. It is in your
best interest to know whether you are properly classified as an
employee or independent contractor.
Recent Independent Contractor vs Employee Cases
Recently, there have been some noteworthy cases where employers
mistakenly classified employees as independent contractors. The
Allstate Insurance Company announced that it agreed to pay $19.5
million to 292 agents who claimed the good hands people wrongly
changed their status from "employees" to "independent
contractors" . This settlement came after Allstate settled
the claims of another 1,000 agents for $22 million. In another
case, Microsoft agreed to pay $96.9 million to employees who contended
that they were not temporary, independent contractors but really
permanent employees of Microsoft.
Contractor vs Employee California
Courts use different tests for workers for deciding different
issues, but there are some common principles. In wage and hour
cases, they focus on the following factors:
- The degree of control the employer exercises over the day-to-day
work performed;
- The amount of the worker's investment in facilities and work
equipment;
- The worker's opportunities for profit and loss;
- The degree to which the worker's independent initiative, judgment
and planning is necessary for the success of the worker's operation;
- The permanency of the relationship between the employer and
the worker;
- The extent to which the services are a part of the employer's
business;
- How dependent is the worker on the employer for continued work.
The courts will look to all the facts of a particular case and
compare them to the appropriate factors. Thus, the employees should
understand that an agreement that he or she is an independent contractor,
though important, will not decide the case.
