Employee or Independent Contractor Test (California)

The employee / independent contractor distinction at workplace is very important. Whether you are classified as employee or an independent contractor is very important to determine - it will affect your eligibility for benefits, the calculation of your taxes, your rights upon termination and your ability to recover from your employer / principal for injuries sustained at work and for their unlawful conduct.

Interestingly enough, employee/contractor distinction is also one of the most commonly misunderstood legal concepts in a workforce. Specifically, the majority of workers believe that just because they sign a contract that verbally states that they are independent contractors, it means that they indeed are and that they have no rights that the employees of the company enjoy.

Courts have been continuously rejecting this “literal” approach for many years. While a written agreement between the hiring body and the workers is one factor in determining the worker’s status, it’s is in no way dispositive in that determination.

Although no absolutely clear test has been established for determining whether a worker is a contractor or an employee, the key factor seems to pervade the vast majority of the California courts’ holdings on this issue: whether a worker is an employee or an independent contractor depends on the degree of control that his/her superior / manager exercises over his/her work. The examples of such control include the following: setting specific work hours and creating a designated work area for a workers, close review and supervision of his work. If an employer exercises actual control over the work, or if the parties understood that the employer could exercise control, the worker is more likely an employee and not an independent contractor.

Further, there has been a clear legislative trend over the past decades to provide employees greater protection from being abusively classified as an independent contractor. Recent court decisions look beyond an employer’s supervisory control to consider the economic context of the working relationship and the purpose of the relevant legislative scheme.

Thus, when the degree of control over the work of a particular person is unclear, consideration of other factors is permitted, such as the parties’ comparative investment in tools and equipment and the worker’s opportunity for profit or loss.