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Independent contractor or employee?

Moreno Valley, CA |

I get paid an hourly rate based on an overall commission formula that has a high and low hourly cap. I work company specified hours from my own office using my equipment. I have been with this company approximately 4 years now. I have a "boss" that determines the hours of myself and the other workers (also independent contractors) Should I be getting paid as an employee or independent contractor?

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Attorney answers 5

Posted

There are various factors to determine if you should be treated as an employee such as the control they have, how you are supervised, agreement, how essential your job function is, etc. Call an attorney to discuss the specifics.

This is not a comprehensive answer and it is impossible to provide a meaningful response without a consultation. Call us for more information. 619.797.5456 www.mataelelaw.com

Posted

I agree with my colleague above. There are number of factors that go into making a determination as to whether you are an employee or independent contractor. I would check out the following link to help you make that determination: http://www.dir.ca.gov/dlse/faq_independentcontractor.htm Contact an attorney to discuss the matter further.

Posted

Take a look at my information below, and if you think you fall into the independent contractor category, speak with an attorney before you do anything. There are always consequences for taking action, and those must be balanced against time limits.

The general rule is that a person is an independent contractor if the employer has the right to control or direct the RESULTS of the work but not HOW the work is done or even WHAT work is done. Many employers misclassify workers as independent contractors and pay them as "1099 employees" when in fact they should be classified and paid as regular W-2 employees. Employers receive a substantial benefit from doing this, but there is NO benefit to the workers. If a worker is wrongly classified as an independent contractor instead of an employee, that worker will not be eligible for many benefits of employment or eligibility will be reduced. Areas affected include the right to:

– be paid for all hours worked or controlled by the employer;
– the legal minimum wage;
– overtime pay;
– rest and meal breaks;
– workers' compensation insurance;
– Social Security contributions;
– unemployment benefits;
– state disability benefits;
– employer benefits such as vacation, sick leave, pension, medical insurance, etc.

Also, in some states, including California, employers are subject to a penalty if they misclassify employees as independent contractors (see below).

There are different ways to determine if a worker is an employee or independent contractor. Employers must comply with all relevant laws.

FEDERAL TAX LAW: The Internal Revenue Service (IRS) looks at three areas to determine a worker’s status:

Behavioral Control – This area considers instructions and training. If the employer has the right to direct or control the work, even if it does not exercise that right, the worker is an employee. These instructions might include when to do the work, or how and where to do it; what equipment or tools to use; who the worker can hire or not hire to help get the work done; what supplies and services to buy, and/or where to buy them. If the employer trains the worker in required methods of doing the work or the procedures to get the work done, this is evidence the employer wants things done its way, which indicates the worker is an employee and not an independent contractor. Therefore, if the employer gives the worker detailed or extensive instructions on how to get the job done, the worker is probably an employee and not an independent contractor.

(continued in Comment below)

twitter.com/MikaSpencer *** All legal actions have time limits, called statutes of limitation. If you miss the deadline for filing your claim, you will lose the opportunity to pursue your case. Please consult with an experienced employment attorney as soon as possible to better preserve your rights. *** Marilynn Mika Spencer provides information on Avvo as a service to the public, primarily when general information may be of assistance. Avvo is not an appropriate forum for an in-depth response or a detailed analysis. These comments are for information only and should not be considered legal advice. Legal advice must pertain to specific, detailed facts. No attorney-client relationship is created based on this information exchange. *** Marilynn Mika Spencer is licensed to practice law before all state and federal courts in California, and can appear before administrative agencies throughout the country. She is eligible to represent clients in other states on a pro hac vice basis. ***

Marilynn Mika Spencer

Marilynn Mika Spencer

Posted

(continued from Answer above) Financial Control – This area considers who has the right to direct and control the business, not just the work. The more of a financial or promotional investment the worker has made in the work, the more likely the worker is an independent contractor. However, there is no requirement for an investment in order to meet the definition of independent contractor. If the worker incurs expenses in performing the work but is not completely reimbursed, the worker is more likely to be an independent contractor rather than an employee, especially if these expenses are high. If the worker has the chance to make a profit or loss on the work, the worker is probably in business for himself or herself and therefore an independent contractor. Relationship of the Parties – If the worker does not receive benefits such as medical coverage, vacation, or pension, the worker may be an employee or an independent contractor. However, if the worker receives benefits, the worker is probably an employee. If the worker is an employee, the employer must withhold income tax and the employee’s portion of Social Security and Medicare taxes. The employer must pay Social Security, Medicare and unemployment (FUTA) taxes on the wages the worker earns. The employer must give the worker an IRS Form W-2, Wage and Tax Statement, every year showing the amount of wages paid and taxes withheld from the worker’s pay. As an employee, the worker has the right to deduct unreimbursed business expenses from the worker’s taxes on IRS Schedule A if the worker itemizes deductions and meets the other requirements established by the IRS. If the worker is an independent contractor, the employer must give the worker an IRS Form 1099-MISC Miscellaneous Income to report what it has paid to the worker. The worker must pay his or her own income tax and self-employment tax, and may be required to make estimated tax payments during the year. The worker can deduct business expenses on IRS Schedule C of his or her income tax return. CALIFORNIA LAW: The main test in California is who has the right to direct and control the “manner and means” in which the job is performed. This is similar to the IRS’ Behavioral Control described above. California then looks at secondary factors, which include: Are the services provided on a long-term or repeating basis? Is the worker paid based on the time spent working? Are the services an integral part of the employer’s business? Does the employer establish the work hours? Does the employer determine how many hours will be worked? Does the employer dictate the order in which job tasks are to be performed? Does the worker spend all of his or her time working for one employer? Is the worker supervised? All of these factors tend to show the worker is an EMPLOYEE. Is the worker in a distinct occupation or trade? Are the worker’s services available to the general public? Can the worker hire, supervise and pay assistants? Did the worker make a substantial investment in facilities or services? Does the worker do the job without supervision? Is the worker highly skilled or working in a specialized field? Does the worker supply the tools and other materials used to do the job? Does the worker provide the location in which the work is performed? Is the worker paid at the end of the project? All of these factors tend to show the worker is an INDEPENDENT CONTRACTOR. Also under California law, an employer can be fined for “willfully misclassifying” an employee as an independent contractor. The amount of the fine ranges from $5,000 to $15,000 per violation. If there is a “pattern and practice” of willful misclassification, the fine can increase to $25,000 per violation. WHAT TO DO OR NOT DO: Even if your employer violated the law, there may be many reasons not to do anything about it just now. Taking action could result in the loss of your job due to employer retaliation. While it is illegal to retaliate against an employee who makes a good faith complaint about unlawful pay practices, all the law

Posted

As my colleagues have stated, there are many factors to consider and you should consult with an attorney to determine whether you should be paid as an employee or independent contractor. However, as a general rule of thumb, if your boss has the right to control the manner and means by which you perform your work, you are more likely an employee than an independent contractor. To be considered an employee, your boss should be controlling more than just the hours you work. For instance, you should consider whether your boss: controls your work, supervises your work, instructs you on how to complete your work, trains you, dictates your hours, provides work supplies, etc. If your boss is "willfully misclassifying" your status, he is subject to penalties of $5,000 to $25,000, depending on the circumstances. There are many more factors, so discuss your concerns with an attorney right away. I hope this helps!

This response is general in nature and cannot be construed as legal advice, given that not all facts are known. Any information provided to you here is not meant to create an attorney-client relationship. If you would like additional information based on this response, please contact my office at 408-289-1701 to schedule a free consultation.

Posted

For California employees, there is actually a pretty intense analysis involved in determining whether someone is an employee or an independent contractor. The law presumes you are an employee, but the employer can present evidence that you are not an employee (called "rebuting" the presumption). Length of time working for an employer is only one of many factors.

The most significant factor is whether the employer has the right to control the type of work you perform and the way you perform the work or complete the task. In addition, a court will look at other factors, including:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

To properly answer your question, you should probably consult with an attorney, The employee/independent contractor analysis is fact-intensive and requires diligent fact-gathering.

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