Are You Really an Independent Contractor, Your Employer May Owe You Money

Many Employers find it convenient to classify employees as independent contractors.  This provides the employer with many advantages, including but not limited to, administrative ease such as no having to withhold taxes each pay period and simply issuing a 1099 at the end of the year, and not having to comply with certain labor laws (and wage ordinances) such as those dealing with overtime and lunch and rest breaks.  So the appeal to employers is evident.  However, if the employees are not really independent contractors, but are mis-classified  as such, the employees are getting short changed.

Recently, the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court, (Opinion No. S222732), unanimously adopted a new standard for determining whether and workers are properly classified as an independent contractor.  The new test makes harder for employers to cheat the system and classify workers as independent contractors.

The Dynamex decision presumes that workers are employees and the employer has the burden to prove otherwise.  The new test set out by the California Supreme Court explains what employers need to prove to meet this burden.  There are three prongs for the employer to establish: (1) that the worker is free from control and direction of employer in performance of work; and (2) that the worker performs work outside usual course of employer’s business; and (3) that the worker is engaged in an established trade, occupation, or business of the same nature as the work performed. So for example, if an advertising company hires a plumber to fix a leak, the plumber is almost certainly an independent contractor.  Conversely, if the same advertising company hires a graphic designed who works full time and is told what to do, when to do it, and how to do it, that worker may very well be an employee who is entitled to payroll withholding, workers compensation coverage, overtime pay, lunches and rest breaks, and sick leave, among other things.

If you are classified as an independent contractor please contact Bitton & Associates for free employment review.