Improper Classification

Improper Classification of Workers as Independent Contractors

With the outsourcing that has been popular in many industries recently, many companies now rely on "independent contractors" to perform work formerly done by company employees. Traditionally, independent contractors were truly in business for themselves and companies contracted with them to perform the occasional job or project for those companies, much like you or I contracting with a mechanic to fix our cars or a plumber to fix our houses.

Now, however, it is common for companies to take core parts of their businesses, such as sales or service, and contract them out to "independent contractors." Usually companies do this to save money and outsourcing to "independent contractors" can save money in a variety of ways, such as:

· Companies pay payroll taxes on the wages and salaries of employees, but do not do so on the pay of independent contractors. Instead, the independent contractor pays the tax.

· Employees are subject to the minimum wage and overtime laws, but true independent contractors are not and do not get paid a premium for working long hours.

· Employees are eligible to participate in employee benefit plans paid for by the employer, such as paid time off, group health insurance, and retirement or 401k plans, while typically independent contractors are not.

· Employers are generally required to provide required tools, specialized equipment, and supplies to employees free of charge while independent contractors can be required to buy their own tools, equipment, and supplies.

For a brief review of the benefits provided workers by California law click here.

Federal and state laws provide that to be a true independent contractor, a worker must control his or her own work, including when, where, and how the work is performed. If the company controls when, where, and how the work is performed, the worker is probably an employee rather than an independent contractor no matter what the paperwork says. Usually companies that outsource important parts of their business, such as sales or service, retain a high degree of control over how that work is performed. Workers who do this work may therefore be employees of the company for whom the work is actually performed and may be entitled to overtime pay, employee benefit coverage including paid vacation, and reimbursement for money they spent on tools, equipment and supplies.

What do courts look at in deciding whether a worker is an employee or an independent contractor?

· Who controls work schedules and how the work is performed?

· Where is the work performed?

· Does the worker provide services for a variety of companies or only for one company?

· Is the work limited to a definite project or is it indefinite in duration?

· Is the worker paid on a commission basis or on some other basis?

· Who makes the work assignments and who supervises or directs the work?

If you think you are being denied your rights to minimum wages, overtime pay or employee benefits we would like to hear from you. If you are treated as an independent contractor and have questions about whether that is proper and whether you should be eligible for overtime pay, we would like to hear from you. Call us at 1-877-7MYWAGE or by email. We will have a member of our staff respond to your inquiry promptly.