Skip to main content

Unemployment for self employed or independent contractor

Gardena, CA |

I worked as an employee for a law firm for 10 years as an employee, then became an independent contractor. I was the billing coordinator. I live in the State of California. All people in the office were told they have 1 week notice and the doors to the law firm close. What are my rights as a self employed who pays their own quartery taxes?

Attorney Answers 3

Posted

Assuming you were not improperly classified as a contractor, you are still self-employed. You just have one less client and would not be entitled to unemployment benefits. It does not appear you were contracting as a corp that pays unemployment benefits and are losing your job.

I think the key issue for you is how long you worked as a contractor, your duties and what, if anything, changed in your duties between being an employee and a contractor. In other words, despite the label were you a de facto employee and thus entitled to unemployment benefits.

Mark as helpful

3 lawyers agree

3 comments

Asker

Posted

Thanks so much for for prompt response. As to the duties I had when I was an employee, they are exactly the same duties I have as an independent contractor. With the exception of a non-9-5 schedule. I payed the quarterly taxes, they paid me one flat fee per month regardless of how much I was there. I just had to make sure the job was completed within that month. It is very unnerving for someone who has commited nearly 19 years of service for a firm. I was self-employed for 8 years. Thanks again.

Michael John Tonsing

Michael John Tonsing

Posted

Hmmmmm. While you were self-employed, did you have other customers? Did you have business cards and stationery? Did you advertise? THese are questions an experienced employer will ask, among others.

Asker

Posted

No I did not have other customers, however I was free to solicit that at my own free will. I never made business cards and did not advertise either. I was happy with what I had from them. Thanks for responding.

Posted

It is suspicious that you would have one customer for your independent contractor business in all those years. Who controls your work? 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, when in fact they are employees. Employers receive a substantial benefit from doing this, but there is NO benefit to the workers. If you are wrongly classified as an independent contractor instead of an employee, you will not be eligible for many benefits of employment or your 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 your work, even if it does not exercise that right, you are an employee. Therefore, if your employer gives you detailed or extensive instructions on how to get the job done, you are probably an employee and not an independent contractor. These instructions might include when to do the work, or how and where to do it; what equipment or tools to use; who you can hire or not hire to help you; what supplies and services to buy, and/or where to buy them. If the employer trains you 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 you are an employee and not an independent contractor.

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 you have made in the work, the more likely you are an independent contractor. However, there is no requirement for an investment in order to meet the definition of independent contractor. If you incur expenses in performing the work but are not completely reimbursed, you are more likely to be an independent contractor rather than an employee, especially if these expenses are high. If you have the chance to make a profit or loss on the work, you are probably in business for yourself and therefore an independent contractor.

Relationship of the Parties If you do not receive benefits such as medical coverage, vacation, or pension, you may be an employee or an independent contractor. However, if you receive benefits, you are probably an employee.

If you are an employee, your employer must withhold income tax and the employee portion of Social Security and Medicare taxes. Your employer must pay Social Security, Medicare and unemployment (FUTA) taxes on the wages you earn. Your employer must give you an IRS Form W-2, Wage and Tax Statement, every year showing the amount of wages paid and taxes withheld from your pay. As an employee, you have the right to deduct unreimbursed business expenses from your taxes on IRS Schedule A if you itemized deductions and meet the other requirements established by the IRS.

(continued in Comment below)

*** 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. ***

Mark as helpful

3 lawyers agree

4 comments

Marilynn Mika Spencer

Marilynn Mika Spencer

Posted

(continued from Answer above) If you are an independent contractor, the employer must give you an IRS Form 1099-MISC Miscellaneous Income, to report what it has paid you. You must pay your own income tax and self-employment tax, and you may be required to make estimated tax payments during the year. You can deduct business expenses on IRS Schedule C of your 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 workers’ 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.

Asker

Posted

I feel I need to re-post this comment from above. I appreciate all this great advice: Thanks so much for for prompt response. As to the duties I had when I was an employee, they are exactly the same duties I have as an independent contractor. With the exception of a non-9-5 schedule. I payed the quarterly taxes, they paid me one flat fee per month regardless of how much I was there. I just had to make sure the job was completed within that month. It is very unnerving for someone who has commited nearly 19 years of service for a firm. I was self-employed for 8 years. Thanks again.

Marilynn Mika Spencer

Marilynn Mika Spencer

Posted

The issue of who is an employee and who is an independent contractor comes up often. The only analysis that is helpful is one based on detailed, specific facts. You cannot get that kind of detailed assistance here on Avvo. Avvo works best for short, specific questions that allow for short, specific answers. Perhaps more importantly, anyone can read the discussions on Avvo so they are not confidential. The employer or whomever is involved in the dispute can read everything written here. You may wish to consult with an experienced plaintiffs employment lawyer. To find a plaintiffs employment attorney in California, please go to the web site of the California Employment Lawyers Association (CELA). CELA is the largest and most influential bar association in the state for attorneys who represent working people. The web site is www.cela.org, and you can search for attorneys by location and practice area. I hope you can resolve your situation and wish you the best.

Michael John Tonsing

Michael John Tonsing

Posted

Employers sometimes think that a part-time employee is an independent contractor. Those two things are quite different. Sounds like that might be what's going on here, but only detailed facts will get you to the "bottom line." I agree. See a lawyer.

Posted

I agree with my colleagues. Whether you will be entitled to unemployment benefits revolves around the issue of whether you were an employee or an independent contractor.

It is likely you were misclassified as an independent contractor if nothing else really changed from the time you were an employee to when you became an independent contractor.

The only analysis that is helpful is one based on detailed, specific facts, which you won't be able to get here on Avvo.

Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult with your own attorney.

Mark as helpful

2 lawyers agree

1 comment

Asker

Posted

I think there is a fine line for sure between independent contractor and being an employee. I think I fell into the self-employed category, but if I didn't, could I collect unemployment? The question is, did I pay into unemployment as a 1099? Probably not. Where does all the money go when you are an employee? Thanks for responding.

Tax law topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics