California Independent Contractor Laws

In California, an independent contractor is typically defined as someone who offers their services to the general public, exercises control over how they perform their tasks, and is generally not under the direct control or supervision of an employer.

The distinction between an “employee” and an “independent contractor” is crucial. It determines the responsibility for all taxes and benefits like health insurance, workers’ compensation, and unemployment benefits.

What Are California Independent Contractor Laws, and What Do They Cover?

California independent contractor laws are the rules and regulations that govern the relationship between employers and workers who are not considered employees but rather self-employed individuals who provide services for a fee. These laws cover various aspects of the rights and responsibilities of both parties, such as taxes, wages, benefits, workers’ compensation, unemployment insurance, labor standards, and liability.

One of the main challenges of California independent contractor laws is determining whether a worker is an employee or an independent contractor. This distinction has significant implications for both the worker and the employer, as it affects how they are treated under the law and their obligations to each other.

In 2019, California enacted a new law, known as AB 5, that changed the way workers are classified as employees or independent contractors. AB 5 requires the application of the “ABC test” to determine if workers in California are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission (IWC) wage orders.

The ABC test presumes that a worker is an employee unless the hiring entity satisfies all three of the following conditions:

• The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
• 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.

AB 5 also provides various exemptions to the ABC test for certain occupations, professions, industries, and business relationships that are subject to different tests or criteria for determining employment status.

Some examples of these exemptions are:

• Certain professional services, such as licensed lawyers, accountants, architects, engineers, veterinarians, dentists, physicians, surgeons, psychologists, podiatrists, etc;
• Certain business-to-business contracts, where a business service provider contracts to provide services to another business entity under specified conditions;
• Certain referral agencies that connect clients with service providers who provide graphic design, photography, tutoring, event planning, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, dog grooming, web design, picture hanging, pool cleaning or yard cleanup;
• Certain occupations or industries that are subject to specific statutes or regulations that govern their labor relations.

California independent contractor laws are complex and evolving. If you are a worker or an employer who is involved in an independent contractor relationship in California, you should consult with a qualified attorney or tax professional to understand your rights and obligations under the law.

What Are My Rights as an Independent Contractor?

As an independent contractor in California, you have certain rights that are different from those of employees.

Some of these rights are:

• Right to work: You have the right to decide when, where, and how you perform your work as long as you meet the expectations of your clients. You also have the right to set your own fees and negotiate the terms of your contracts.
• Right to contract: You have the right to sign an independent contractor agreement with your clients, which protects your interests and defines the scope and duration of your work. You can also terminate your contracts according to the agreed-upon terms.
• Right to payment: You have the right to receive payment for your work according to the terms of your contracts. You can also pursue legal action against clients who fail to pay you or breach your contracts.
• Right to correct classification: You have the right to be correctly classified as an independent contractor and not an employee unless your work relationship meets the criteria of the ABC test. The ABC test is a three-part test that determines if you are an employee or an independent contractor based on your level of control, scope of work, and business independence.
• Right to legal recourse: You have the right to seek legal help if you believe your rights as an independent contractor have been violated. You can file a complaint with the Labor Commissioner’s Office or file a lawsuit in court against clients who misclassify you, exploit you, or discriminate against you.

These are some of the rights that you have as an independent contractor in California. However, you should also be aware of your responsibilities and obligations, such as paying taxes, obtaining licenses, maintaining insurance, and complying with laws and regulations. If you have any questions or concerns about your status or rights as an independent contractor, you should consult with a qualified attorney or tax professional.

How Are Independent Contractor Laws Typically Violated?

When businesses seek to cut operational costs and circumvent labor laws, one common method they may use is the misclassification of workers. By labeling workers as “independent contractors” rather than “employees,” employers can avoid paying overtime, providing benefits, and covering certain taxes.

While financially beneficial for the employer, this misclassification places an undue burden on the worker. For instance, an independent contractor must shoulder the responsibility for all taxes, which would typically be split between the employer and employee. They would not be entitled to protections under wage and hour laws, which means no guaranteed minimum wage or overtime pay.

Additionally, in the evolving landscape of work, the gig economy is flourishing. This economy, consisting of short-term contracts or freelance work as opposed to permanent jobs, often uses platforms or apps to hire gig workers. Such platforms have given rise to a gray area where it’s easier for employers to blur the lines between an employee and an independent contractor. While gig work offers flexibility, it sometimes comes at the cost of job security, benefits, and proper compensation.

Businesses and workers must be educated about the distinctions between these classifications to ensure fair treatment. Recognizing the signs of misclassification and understanding the associated rights and responsibilities can prevent potential violations of independent contractor laws.

Are There Any Legal Remedies Available for a California Independent Contractor Law Violation?

Absolutely. If a worker is misclassified as an independent contractor when they should be an employee, they may be entitled to back pay for wages, including overtime, benefits, and even penalties. Furthermore, if an independent contractor faces a breach of their contract, they can pursue legal action to enforce the terms of the agreement or seek damages.

Should I Hire a California Employment Law Attorney?

If you suspect you’ve been misclassified as an independent contractor or face issues related to your independent contractor status, it’s advisable to consult a legal professional.

An experienced California employment lawyer can guide you on your rights, potential remedies, and assist you in any legal proceedings. When in doubt, turn to LegalMatch to find the right attorney tailored to your needs.