Independent Contractor v. Employee: Am I Properly Classified?

The misclassification of employees as independent contractors is a common error made by employers. Although some employers inadvertently misclassify employees as contract workers due to a lack of understanding of the law, others do so on purpose in order to avoid legal obligations owed to employees. This is because employees have specific rights under California law that are not afforded to independent contractors. Below is some basic information regarding the difference between employees and independent contractors.

Employees versus Independent Contractors

An employee is someone who a California business has hired and has substantial control over how and when work is performed. Generally, the employee performs work for the company that is regularly part of the company’s business. An employee will work at the company’s place of business, have regularly scheduled hours, receive an hourly wage or annual salary, receive direction and training from the company, and is subject to discipline. Often times the California employer provides training, guidelines and other supervision over the work performed by the employer.

On the other hand, independent contractors typically provide specialized work that isn’t related to a company’s regular business and often provide services for multiple clients. Independent contractors often establish their own pay, provide their own equipment, work from their own office or home, and decide when and how the work will be performed. While a client may provide deadlines or specifications for the work needed, the independent contractor determines how best to complete the work and how much time will be spent.

Employee Rights in California

There are several protections afforded to employees under both federal and California laws. Some of the rules that apply to employees but not independent contractors in California include that employees:

• Must have their state and federal payroll taxes withheld by the employer;
• Are eligible for unemployment benefits from the state of California;
• Are entitled to wage and hour protections, such as minimum wages and overtime pay; and
• Are protected from discrimination under state and federal antidiscrimination laws.

Proper Classification of California Workers

In the state of California, numerous state agencies have specific tests to determine whether a worker is an independent contractor. The Employment Development Department (EDD) uses one test if it suspects a California employer was supposed to withhold payroll taxes from the worker’s wages or if a worker is seeking unemployment benefits. The California Division of Workers’ Compensation, on the other hand, uses a different test when analyzing whether or not someone is entitled to workers’ compensation benefits.

The California Supreme Court established a test that employers must meet for employees to be named independent contractors. Companies must show that all of the following are true:

• The worker is free from control and direction, in the contract terms and in actuality, from the company in performing the work;
• The work performed is one that is outside of the company’s regular business; and
• The worker is typically engaged in a trade, occupation, or business - independently - that is the same work as what is performed for the company.

California Employment Attorneys

Properly classifying a worker is important because if a California business misclassifies an employee as an independent contractor, the employer may not be satisfying its duty to provide rights owed to employees such as paying minimum wage, overtime pay, meal periods, and rest breaks. If you or someone you know believes an employer has misclassified you, contact the experienced attorneys at Haig B. Kazandjian Lawyers, APC.

Non-Exempt vs. Exempt Employees: How do I Know I am Being Classified Properly?

California labor law mandates that most employers follow certain rules when it comes to worker pay and benefits. Some of these include setting pay at or above minimum wage, paying overtime, providing rest breaks, and tracking workers’ hours. Some workers, however, are not subject to some of these requirements under state and federal labor laws. These workers are referred to as exempt employees.

Determining When a Worker is Exempt

Generally speaking, there are three factors that are looked at to determine whether or not a worker is considered an exempt employee under California law. First, the worker must receive a salary that is at least double the state’s minimum wage standard for full-time employment. Second, the worker’s primary duties must be executive, professional, or administrative tasks. Third, the worker’s job duties must allow him or her to use discretion and independent judgment. If the worker meets all three of these factors, he or she will likely be classified as an exempt employee – meaning minimum wage, overtime pay, and rest break (not meal break) requirements are not required. Some jobs, however, are subject to a different test to determine exemption. Other jobs arepartially exempt from California wage and labor laws.

Federal law, specifically the Federal Labor Standards Act (FLSA), has five primary exemption tests. The FLSA is the law that determines whether or not a job should have an exempt status and overtime requirements. FLSA covers several aspects of labor law including minimum wage, record keeping, hours worked, overtime pay, and youth employment standards. The FLSA applies to both workers in the private sector as well as the federal, state, and local governments.

Federal Exemption Tests

The ways in which the FLSA makes this determination is through the executive test, administrative test, professional test, outside sales test, and computer test. FLSA places a base salary that must be met in order for a worker to be considered an exempt employee.

• The executive test requires the worker meet the salary threshold, have the primary duty of managing the business or its subdivision(s), regularly direct the work of at least two other full-time employees, have the authority to hire or fire employees or give recommendations.
• The administrative test requires the worker meet the salary threshold, perform non-manual or office work directly related to the management of the business, be able to exercise discretion and independent judgment.
• The professional test requires the worker meet the salary threshold; have the primary duty of performing work that requires advanced knowledge, is predominantly intellectual, and requiring the exercise of discretion and judgment.
• The outside sales test requires the worker be regularly engaged in work making sales and obtaining orders or contracts for services that keeps him or her away from the employer’s place of business.
• The computer test requires a worker meet the salary threshold and be employed as a computer programmer, systems analyst, software engineer, or other similarly skilled work in the field performing specific tasks.

Know Your Rights

If you or someone you know believes an employer has misclassified you, contact the Glendale employment law attorneys at Haig B. Kazandjian Lawyers, APC.