Under California employment law, the basic definition of "independent contractor" is a person who performs services for someone else and retains control of how the service is performed.1
If someone performing services for someone else does not meet the formal definition of an independent contractor, then they are presumed to be an "employee" for purposes of California labor law.2
This distinction is important because the protections of California wage and hour law--including rules about overtime pay, minimum wage and meal and rest breaks--only apply to employees, and not to independent contractors.
However, employers cannot get around California wage and hour laws by simply declaring that an employee is an independent contractor, or by making the employee sign an agreement stating that s/he is an independent contractor.
Unless the person hired meets the legal definition of independent contractor, s/he is an employee--and will receive all the protections California employment law provides to employees.3
Below, our California employment lawyers answer the following frequently asked questions about the distinction between independent contractors and employees:
- 1. What is the difference between an independent contractor and an employee in California employment law?
- 2. What if I signed an agreement stating that I am an independent contractor?
- 3. What should I do if my employer has been wrongly classifying me as an independent contractor to avoid California wage and hour laws?
If you have further questions after reading this article, we invite you to contact us at Shouse Law Group.
1. What is the difference between an independent contractor and an employee in California employment law?
The traditional definition of an independent contractor in California labor law is someone who performs services for another, where both of the following are true:
- The person performing services is promised a specific payment for a specific result; and
- The person performing services retains control over how the task was performed.4
If the person receiving the services exercises primary control over how the task is performed--instead of just naming the desired result--then an employee-employer relationship has been formed.
California courts have elaborated on this basic definition by naming more factors that are relevant to whether someone is an independent contractor or an employee. These include:
- Whether the person receiving services has the right to fire the hired person without cause (if so, it is more likely to be an employment relationship);
- Whether the person performing services is engaged in a distinct occupation or business;
- The type of services/occupation being performed;
- The skill required for the services or occupation;
- Whether the hiring person or the worker supplies the tools and the place of work;
- The length of time for which services are to be performed;
- The method of payment (by the hour or by the job/task);
- Whether or not the work is part of the regular business of the person requesting services; and
- Whether the parties believe they are creating an employer/employee relationship.5
Example: Juan runs an online company making and selling scented candles. He knows nothing about web page design. So he hires Hannah to design a web page for him for a set amount of money.
Juan is impressed by Hannah's work designing the page, so he also asks her to maintain it for him going forward, for a monthly fee. Hannah does all the work in her own home office and does similar work for a number of other clients.
Hannah is probably an independent contractor because she retains control over how the work is accomplished, she is a skilled professional, and the work she does is not part of Juan's regular business.
Example: Hannah's web design business is growing. She finds she needs some help meeting her clients' needs. So she contracts with Pete, a recent college graduate who has some web design skills.
Hannah has Pete handle some of her easier web design jobs for her. His hours vary from week to week, and she pays him by the hour. Pete does the work in Hannah's home office. She also checks his work after it is done. They have signed an agreement stating that Pete is an independent contractor.
But Pete is probably actually an employee under California employment law, because Hannah controls his performance of the work. Thus, Hannah is required to pay him overtime under California overtime laws when he works more than a certain number of hours in a day or week, and provide him with regular meal and rest breaks.
It is common for hiring arrangement to involve an "independent contractor agreement" in which the person being hired agrees that s/he is an independent contractor and not an employee (and thus not protected by wage/hour and other laws, such as workers' compensation, that apply to California employees).
But these agreements do NOT determine the nature of a hiring relationship in California.
You can be an employee even if you signed an agreement stating that you are an independent contractor. What matters is whether the nature of your work and relationship with the person hiring you indicate that it is an employment relationship.6
3. What should I do if my employer has been wrongly classifying me as an independent contractor to avoid California wage and hour laws?
If you believe that a person hiring you to perform services has been wrongly classifying you as an independent contractor, then California law provides you with the means to enforce your rights.
If you are an employee, and you are not an exempt employee under California law, then you are entitled to overtime pay and meal / rest breaks. Your employer also may not pressure or force you to "work off the clock."
This means that California employees who have been mis-classified as independent contractors may bring wage/hour lawsuits against their employers to collect overtime compensation that was wrongfully denied to them--along with interest on the unpaid overtime and possibly attorney's fees.
In addition, employees wrongly classified as independent contractors who did not receive meal and rest breaks are entitled to an hour's pay at their regular rate for each break that they did not receive.
Call us for help....
For questions about the distinction between independent contractors and employees in California or to discuss your case confidentially with one of our skilled California labor and employment attorneys, do not hesitate to contact us at Shouse Law Group.
We have local employment law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.
- Labor Code 3353 LC -- Independent contractor. ("“Independent contractor” means any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.")
- Labor Code 3357 LC -- Employee presumption. ("Any person rendering service for another, other than as an independent contractor, or unless expressly excluded herein, is presumed to be an employee.")
- Yellow Cab Cooperative, Inc. v. Workers' Comp. Appeals Bd. (1991) 226 Cal.App.3d 1288, 1297. ("Even in the common law setting, a formal agreement characterizing the relationship as independent contractorship “will be ignored if the parties, by their actual conduct, act like 'employer-employee.' [Citations.] Indeed, the attempt to conceal employment by formal documents purporting to create other relationships [has] led the courts to disregard such terms whenever the acts and declarations of the parties are inconsistent therewith.")
- Labor Code 3353 LC -- Independent contractor, endnote 1 above.
- G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350–51. ("However, the courts have long recognized that the “control” test, applied rigidly and in isolation, is often of little use in evaluating the infinite variety of service arrangements. While conceding that the right to control work details is the “most important” or “most significant” consideration, the authorities also endorse several “secondary” indicia of the nature of a service relationship. Thus, we have noted that “[s]trong evidence in support of an employment relationship is the right to discharge at will, without cause. [Citations.]” *351 ( Tieberg, supra, 2 Cal.3d at p. 949, quoting Empire Star Mines, supra, 28 Cal.2d at p. 43.) Additional factors have been derived principally from the Restatement Second of Agency. These include (a) whether the one performing services is engaged in a distinct occupation or business; (b) 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; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee. ( Tieberg, supra, at p. 949; Empire Star Mines, supra, 28 Cal.2d at pp. 43-44; see Rest.2d Agency, § 220.) (4a) “Generally, ... the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” (Germann, supra, 123 Cal.App.3d at p. 783.)")
- Yellow Cab Cooperative, Inc. v. Workers' Comp. Appeals Bd., endnote 3 above.