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Employee or Independent Contractor?

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If you are an employee and believe you have been wrongfully classified, you have two options:

  1. Go to state agencies such as DLSE to seek enforcement of the law 
  2. Or, if you are an independent contractor, you must go to court to settle disputes or enforce other rights under your contract

If you go through with the first option, DLSE, or the Division of Labor Standards Enforcement, will start with the assumption that you, the worker, are an employee. This means applying the “multi-factor” or the “economic realities” test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989). 

The “economic realities” test distinguishes between employees and independent contractors. This is decided based on economic dependence, whether the worker is in business as an independent contractor, or is economically dependent on an employer for work, or employee. 

Additional factors that may be considered are: 

  1. Whether the person performing services is engaged in an occupation or business different from the employer
  2. Whether or not the work is a part of the regular business of employer
  3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for the person doing the work
  4. The employee’s investment in the equipment or materials required 
  5. Whether the service requires a special skill
  6. The kind of occupation, and if the work is usually done under the direction of the employer or by a specialist without supervision
  7. The employee’s opportunity for profit or loss depending on his or her managerial skill
  8. The length of time for which the services are to be performed
  9. The degree of permanence of the working relationship
  10. The method of payment
  11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing but is not determinative 

Even if there is an absence of control over work details, an employer-employee relationship will be found if:

  1. The employer retains control over the operation as a whole
  2. The worker’s duties are an integral part of the operation
  3. The nature of the work makes detailed control unnecessary (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991))

Other points to remember are that in determining whether a worker is an employee or independent contractor are:

  1. The existence of a written agreement to establish an independent contractor relationship is not determinative 

The fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status (Toyota Motor Sales v. Superior Court (1990)).

Sara Ovando
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