Employee or Independent Contractor: A Distinction That Makes a Difference
05/06/2015 // San Francisco, CA, United States // Keller Grover LLP // Eric Grover // (press release)
On the surface, it seems just a label: employee or independent contractor? But how an employer classifies a worker can make a big difference in the protections and benefits he or she is entitled to. The issue has become particularly important today, as many companies are filling their rosters with what they deem independent contractors. In many cases, that is just what they are. But not always. And the misclassifications can prove costly for workers.
In a new Google Hangout from the California wage and hour law firm Keller Grover, veteran lawyer Eric Grover explains how the law determines whether a worker is an independent contractor or, in fact, an employee. “There is no one particular thing that you look at,” says Grover. “It’s a multi-factor test that has been in place for many years. There are as many as 10 or 12 different factors.”
In the video — which is now available for viewing on YouTube Eric Grover also discusses the remedies workers can pursue if they think they have been misclassified as independent contractors.
In determining employee from independent contractor, a primary consideration is whether the work involved is part of the regular business of the employer. As Grover explains in the Hangout: “If you own a store and you need the building painted, hiring a painter is not related to the regular business of selling out of the store, so that painter is an independent contractor,” Grover explains.
On the other hand, if the employer is a call center and it hires people to come in and handle those calls, that work would be directly related to the business, making it harder to argue that those workers are independent contractors.
Other factors that are considered include whether the worker has made any investment in the materials to do the job, such as brushes and drop clothes in the case of a painter. A call center worker, for instance, would typically be working with tools — a desk, a computer, a phone — provided by the employer. So once again it would be harder to make an argument that the worker is an independent contractor, and not a regular employee.
The difference is crucial because, as Grover explains, a worker classified as an ‘employee’ would enjoy protections and benefits that independent contractors do not have, such as reimbursement for certain work-related expenses. Employers would also have to supply Workers’ Compensation insurance, pay payroll taxes, and meet any relevant wage requirements, such as paying minimum wage and overtime.
Given the additional costs that an ‘employee’ designation can mean for an employer, it is not surprising that some businesses will try to shift those expenses back to their workers, by classifying them as independent contractors. The good news is that there are steps workers can take to remedy that situation.
“If a worker believes they have been misclassified, they can bring a private lawsuit to recover back wages and expenses that should have been paid by the employer,” says Grover, whose firm has offices in Los Angeles and the San Francisco Bay Area. “Workers in California can also go to the Labor Commissioner’s Office and pursue a claim that way,” he adds. “Or, if outside of California, look to the federal Department of Labor for assistance.”
Online resources can help, as well. To learn more about how California laws cover employee and independent contractor classifications — as well as other key wage and hour topics — workers can turn to the website of the California Department of Industrial Relations at www.dir.ca.gov/dlse, along with Keller Grover’s own employment law site, at www.CaWageHourLaw.com or call the firm at 1-888-601-6939.
“Employers have traditionally had the upper hand in the business-worker relationship, and too often they misuse that power,” says Grover. “But information is power, too, and by learning more about their rights — and how to protect and enforce them — workers can level the playing field, and get the compensation and benefits they are entitled to.”
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