INDEPENDENT CONTRACTOR OR EMPLOYEE?
Every day, millions of Americans are asked to work overtime without overtime compensation. Some do so because they have been classified as exempt. Others do so because they are classified as independent contractors.
But being an independent contractor rather than an employee can be a crippling financial difference for the average worker. With the high cost of living and shortage of housing, it’s hard to make a living in California.
That should not be the cases in the world’s sixth largest economy. Especially because California has been the bedrock of so much innovation and birthed so many Fortune 100 companies in Silicon Valley. Those companies however, did not want to pay their fair share to support California’s economy. Instead, they sought to transfer the cost of operating their business onto workers under the guise of Independent Contractor status. It used to be a savvy loophole to the California Labor Code but thankfully the California Supreme Court stepped in to correct the ever widening wage gap.
The financial implications of being an independent contractor are more onerous than simply being misclassified as an “exempt” employee. Because even exempt employees are entitled to reimbursement for work-related expenses, and must be provided certain Labor Code protections, including mandatory paid leave.
Independent contractors however, must bear the burden of all work-related expenses, from insurance, to tools and supplies, gas and mileage, all of these costs fall on the worker – and they are not entitled to overtime pay, duty-free meals or rest breaks.
Conversely, the employer benefits from the labor of the independent contractor but does not have to comply with any section of the Labor Code. The employer can require infinite hours of work to complete a certain task. Often the contract executed with the independent contractor does not even provide for basic minimum wages, once all of the hours required to complete the work are factored into the wages paid. Failure to provide duty-free meal breaks and rest breaks further magnifies this wage disparity. Moreover, as discussed above, the worker is required to pay all of the costs and expenses required to carry out the work.
The difference between being classified as an independent contractor or an employee is significant, as is the incentive to classify workers as independent contractors. Some employers intentionally misclassify, while others are simply negligent and thus, may find coverage from their insurance policy in the event litigation is the means that they realize the error of their ways.
This practice of misclassification however, spans the entire labor force, from the gig economy to truck drivers. Millions of workers look at their paychecks with disbelief at the low sums they are paid for the many many hours they are expected to work. Some work to pay for the tools and trucks they must use to perform the work that makes them essentially indentured servants to their Independent Contractor agreements.
There is nothing independent about a worker who cannot afford to leave.
Independent Contractors Should Confirm They Have Not Been Misclassified
The California Supreme Court recently reaffirmed the presumption that all those whom an employer “suffers or permits” to work are presumed to be employees.
Under the A-B-C test announced by California’s High Court, all workers are presumed to be employees and independent contractor status is allowed only if the employer proves all of the following:
(A) that the worker is free from control and direction over the performance of the work, both under the contract and in fact;
(B) that the work provided is outside the usual course of the business for which the work is performed; and
(C) that the worker is customarily engaged in an independently established trade, occupation or business.
This watershed decision, which was unanimously announced last April 2018, falls in line with longstanding principles of California’s Labor Code and the Wage Orders of the Industrial Welfare Commission, which outlawed such ruthless practices as child labor a century ago.
Today, California’s High Court stepped in to reaffirm the principle that employers cannot shift the cost of business onto the shoulders of their hard workers. Those who are subject to any independent contractor agreement are highly encouraged to seek immediate legal advice regarding the legality of their working relationship and the value of any potential claims for reimbursement of work related expenses, that may be crippling to many and their families.
Contact Vision Legal, Inc., and speak with an experienced labor and employment lawyer who understands the law regarding independent contractors and employees. We have experience working across a broad range of industries and understand how to navigate the complexities of the various exemptions provided under both California and federal law.