Sometimes it’s difficult to know if you are an employee or an independent contractor. Even more often it’s hard to know if you actually en employee even though you’re called an independent contractor. If you’re not sure, you might be one of the many who are “employees” in everything but title.
You might be an “employee” if you:
- Work for ONLY one company
- Put in very long hours
- Are under close supervision
Why should you care if you are classified as an employee or as an independent contractor?
1. Independent contractors pay self-employment taxes.
2. Independent contractors do not qualify for state unemployment relief if they are let go or not “renewed.”
3. Independent contractors are not eligible for employer-paid benefits.
The IRS has a multipart test in place that has to be met in order to qualify for legitimate independent contractor status. If it is determined that an employer has been misclassifying employees as independent contractors according to the multipart test, employers may be subject to penalties assessed for back employment taxes and/or overtime wages for workers.
In recent news, the FedEx drivers in California and Oregon, that were considered independent contractors by the company, were dubbed employees by the court. Now there are drivers for both Uber and Lyft car-sharing services (popular in southern California urban areas) that are also challenging their independent-contractor status.
This isn’t an issue that is likely to go away any time soon. Many businesses tend to push the limits on legal definitions in order to keep labor costs low, and avoid passing official employee count thresholds that can trigger additional coverage requirements and programs (such as family leave and health care).
That’s not to say that being an independent contractor is a bad thing. Independent contracting has a lot of benefits for both the employer and the contractor. A lot of workers enjoy the freedom is can offer. They can set their own hours and the pace of their work. They can work for a variety of different clients. They can deduct their own business expenses from their income. But the problem comes when a worker is hired as an “independent contractor” and then treated like an employee. This set up takes all the benefits out of the arrangement on the side of the worker leaving the employer with all the “good” cards.
If you suspect that you might be misclassified as an independent contractor, contact an expert in southern California employment law as soon as possible at Blumenthal, Nordrehaug & Bhowmik.