What’s the difference between an employee and an independent contractor in California?
When you’re talking about someone who works for a business, there are many names that you could call them. Employee, worker, contractor, and so much more. But are these words all interchangeable, or do they each mean something different in the eyes of the law? California-based Davtyan Law Firm is here to help you understand the difference between the terms and why understanding the difference is important for your paycheck and your legal rights.
You may be surprised to find out that some of these words mean very different things when it comes to legal protections and benefits. In general, the term “worker” is the umbrella category for all people who are employed. However, there are major differences between “employees” and “independent contractors” (sometimes just called “contractors”), and misclassification can lead to a whole slew of problems for both the worker and the employer.
AB5 & The ABC Test
As job roles change and the gig economy grows, the law has struggled to keep up with a way to easily classify workers. As a result, Governor Gavin Newsom signed AB5 in 2019, which was the result of unrest between delivery companies like Uber and Lyft and their drivers. AB5 requires that employers use something called the “ABC test” to determine whether a worker is an employee or an independent contractor. Under the “ABC test” if a worker meets all three of the following requirements they are an independent contractor:
- The worker performs tasks that are outside of the employer’s usual scope of business;
- The worker is engaged in a trade or job that is customarily treated as a contractor role; and
- The worker is free from direct control from the employer regarding the “precise manner or details” of the task
If a worker does not meet one or more of these requirements, they are an employee. However, there are still some instances where the ABC test is unable to be used. In these cases, a test called the “Borello test” is used instead. Which test will be used depends on the facts of each individual situation. If you have questions about determining your classification, you should contact a California labor lawyer at Davtyan Law Firm for assistance.
Why Is Worker Classification Important?
There are many reasons why classifying a worker properly is important for all parties. First, it affects the taxes of both the employer and the worker. Misclassifying a worker can cost both parties thousands of dollars at tax time. Benefits like health insurance and paid time off are another issue that arises when talking about worker classification. Because most independent contractors are not eligible for typical employee benefits like paid leave, health insurance, and retirement plans, making sure you are correctly classified is crucial. Lastly, your classification determines which legal protections you qualify for at both the state and federal levels.
If you are unsure if you are classified correctly as an employee or independent contractor, you may need to speak with a California employment lawyer. It is best to speak to a lawyer as soon as possible to make sure that you are getting all of the pay and benefits that you are entitled to. Call Davtyan Law Firm today to speak with a staff member about your situation.