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Is There A Difference Between An Employee And An Independent Contractor?

Employees And Independent Contractors Are Very Distinct And Different From Each Other

In an effort to save money and the headaches ordinarily associated with employing someone, some employers treat their employees as independent contractors. Such business practices could expose a business to penalties, damages, and other liabilities.

In evaluating whether a relationship is one of employer-employee or that of an independent contractor, “[t]he label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.” S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341, 349 (1989). Rather, the proper analysis focuses on the employer’s “control of details” — that is, “whether the principal has the right to control the manner and means by which the worker accomplishes the work.” Id.; see also Estrada v. FedEx Ground Package System, Inc., 154 Cal. App. 4th 1, 10 (2007). There are, of course, other factors which the courts consider:

  1. (1) whether the worker is engaged in a distinct occupation or business,
  2. whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision,
  3. the skill required,
  4. whether the principal or worker supplies the instrumentalities, tools, and place of work,
  5. the length of time for which the services are to be performed,
  6. the method of payment, whether by time or by job,
  7. whether the work is part of the principal’s regular business, and
  8. whether the parties believe they are creating an employer-employee relationship. Estrada, 154 Cal. App. 4th at 10.

In evaluating this, the worker enjoys a presumption that he is an employee of the principal. See, e.g., Labor Code § 3357. Therefore, “[o]ne seeking to avoid liability has the burden of proving that persons whose services he has retained are independent contractors rather than employees.” Borello, 48 Cal. 3d at 349 (1989).

If an employer incorrectly classifies and employee as independent contractor, the employee is deprived of benefits that the employer offers to its employees. In a lawsuit seeking to correct his misclassification, the employee can retroactively receive the value of these benefits.

Likewise, employers tend to not give their independent contractors the same rights they afford to their employees. For example, independent contractors are often not provided meal breaks or overtime pay. If a court reclassifies a previously styled independent contractor relationship as an employment relationship, the employee could become entitled to damages and penalties for the employer’s failure to comply with the labor laws. Moreover, if an employer fails to “willfully” comply with its obligation to pay wages correctly, they face financial penalties under Section 203 of the Labor Code which consists of an amount equal to the sum of the employee’s wages at the employee’s prior rate of pay, until the unpaid wages are paid, in an amount not to exceed thirty (30) days. See Mamika v. Barca, 68 Cal. App. 4th 487 (1998).

In construing “willful” in the context of wage and hour labor code violations, Courts have held that the term willful means “[t]he employer ‘intentionally failed or refused to perform an act which was required to be done . . . . It does not mean that the employer’s refusal to pay wages must necessarily be based on a deliberate evil purpose to defraud workers for wages which the employer knows to be due.” See Road Sprinkler Fitters Local Union No. 669 vs. G&G Fire Sprinkles, Inc., 102 Cal. App. 4th 765, 781 (2002).

The reclassified employee is also entitled to his attorneys’ fees.

Also, pursuant to a new law, an improper classification may expose an employer to a civil penalty of between $5,000 to $25,000. In addition, if an employer is found liable for willfully misclassifying an employee’s employment status, it may be required to prominently display a notice on its company’s website that states: a court “has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees.” Lab Code § 226.8(e)(1).

For additional information, please call our Los Angeles employment attorneys at (310) 499-0140.