It is common for employers to improperly classify employees as independent contractors. Some employers do this in an attempt to avoid certain wage and hour law requirements such as payroll taxes, minimum wage or overtime, meal periods or rest breaks, workers compensation insurance, and payments in relation to social security and unemployment or disability insurance.
California Law provides a “multi-factor” or “economic realities” test to determine whether an employee is properly classified as an independent contractor. The most important factor in the test is whether the person who is requiring the service (employer) has control or the right to control the employee as to what work they perform and how it is carried out. An employee/employer relationship will be found if the employer oversees the operation in its entirety, the work performed by the worker is an essential part of the operation, and if the nature of the work itself makes detail control unnecessary. Many other factors that may be considered are listed below:
- Whether the employee is engaged in an operation or a business that is distinct from that which he is contracted to do work.
- Whether the work contracted is part of the regular business operations of the employer.
- Whether the employer supplies the materials and the work-site for the employee.
- The employee’s level of investment in the materials used during the contracted work.
- Whether a special skill is needed for the contracted work.
- Whether the employee’s occupation is a specialization and the employee works without supervision.
- What opportunity the employee has for profit or loss depending on his or her own managerial skill.
- The length of time the employer is to be contracted.
- The level of permanence for the employee in the contracted work.
- Whether the employee is paid by the job performed or by hours worked.
The courts look beyond written agreements that purport to establish an independent contract relationship. The existence of such documents is not determinative of whether an employee is an independent contractor or not.