What's the Difference Between Independent Contractors (1099) and Employees?
May 19, 2015
All companies who have employees are required to follow California labor laws. This means that they must pay their employees at least the current state minimum wage of $9.00 per hour, compensate employees additionally for overtime hours worked, provide adequate meal and rest breaks, and more. They also must pay payroll taxes, pay for unemployment and workers’ compensation insurance, reimburse them for business expenses, and more. As you can see, having employees can be costly for a company and too many company owners try to cut costs by classifying workers as independent contractors instead of employees, since labor and employment laws do not apply to independent contractors. Misclassification violates labor laws, however, and employers can face steep penalties if they purposefully do so. Additionally, workers who were misclassified may likely be entitled to substantial compensation.
Are you an employee or an independent contractor?
Many people may not be aware that they have been misclassified. California law does not set out a strict definition of independent contractor. Instead, companies should examine many factors in order to decide how to classify a certain worker. The California Division of Labor Standards Enforcement (DLSE) gives these factors as examples:
Whether the worker has their own business;
Whether the worker provides their own tools and supplies;
The type of work that is being performed;
If payment is by time spent or a flat fee for the entire job;
Whether the relationship is permanent or for only one job;
Whether the worker or company believed they were creating an employment relationship;
If the worker’s job is an integral part of the business operation;
Whether the work requires a particular set of special skills; and
How much supervision is required over the worker
A large part of this determination is whether or not the company has a large amount of control over the worker. For example, if a company tells a worker when to show up, what to wear, what hours are required, and more, the worker is likely an employee under the law. If a worker sets their own schedule and provides their own equipment, they may be an independent contractor. These determinations are not always clear cut, however, and misclassification does happen. If an employer wilfully and wrongfully classifies an employee as an independent contractor, there are severe penalties under California law including thousands of dollars in fines.
Contact an experienced California employment law attorney for help today
Anyone who is misclassified as an independent contractor may deserve a substantial amount of back pay and other compensation if they were not paid at least the California minimum wage during their employment. The laws regarding independent contractors in California can be complicated and your employer will almost certainly work as hard as possible to avoid liability. At the Pershing Square Law Firm, we help California employees make sure they receive all income and protections to which they are entitled under the laws of our state and the federal government.