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Wage Claims, Overtime & Other Employee Compensation

BEING AN INDEPENDENT CONTRACTOR OR 1099 WORKER:
IS IT GOOD OR BAD FOR YOU?

A: Yes, it does. Independent contractors are not employees and, therefore, do not have the same rights and protections that employees enjoy. Employees are entitled to the following rights and benefits guaranteed by the Labor Code and the Wage Orders:

     1) the right to minimum wage
     2) the right to overtime pay
     3) the right to the employer’s share of the social security, unemployment and disability taxes
     4) workers’ compensation protection
     5) additional benefits granted by employers to employees such as sick pay, retirement and profit-sharing plans
     6) protection from discrimination
     7) protection from wrongful termination of employment

     Persons classified as independent contractors are not entitled to any of the above rights and benefits. Hence, they cannot, for example, assert their rights to minimum wage or overtime payment. Unlike employees, independent contractors are not paid one and half times the regular hourly rate when they work more than 8 hours per day or more than 40 hours per week. They cannot claim Social Security, unemployment, or disability benefits or avail of worker’s compensation benefits when they are injured at work. It is to the worker’s benefit, therefore, that he or she be correctly treated as an employee.

     It is a common misconception that just because the worker has agreed to be classified as an independent contractor and has agreed to receive a 1099, that therefore, the worker has been correctly classified as an independent corrector. This is not so. The independent contractor status is determined by law, not by the parties’ agreement.

     Although the law does not define the term “independent contractor” the courts and enforcement authorities provide guidance. How can a worker know that he or she has been correctly classified as an independent contractor?

     Courts consider the following factors to determine whether a worker is an employee or independent contractor:

     1. The employer’s right to control the manner and means of performance.
     2. Whether the employment relationship may be terminated at will.
     3. Whether the worker engages in an occupation or business distinct from the employer’s.
     4. Whether the type of work done by the worker is usually done under the employer’s supervision.
     5. The skill required to perform the work.
     6. Who provides the instrumentalities, tools and place of work.
     7. The length of time for the performance of the service.
     8. Method of payment, or whether payment for work is by time, piece, rate or job.
     9. Whether the worker may hire others.
     10. Whether the services are part of the employer’s regular business.
     11. Whether the parties believe they are creating an employment or independent contractor relationship.

     Factors That Determine Employee versus Independent Contractor Status

     The law protects the employee by formulating rules that affirm the employee status of the working person. However, some employers still resort to the practice of misclassifying their workers as independent contractors to save money. How can a worker know that he or she has been correctly classified as an independent contractor? Courts consider the following factors:

     1. The employer’s right to control the manner and means of performance. This is the most important factor. If the employer has the right to exercise complete control over how the worker should do the work, then the worker is an employee. Employers will direct the employee what tasks to accomplish and how to accomplish these tasks.

     2. Whether the employment relationship may be terminated at will. The right to terminate the relationship at will, without cause, is strong evidence that an employer-employee relationship exists. Independent contractors are normally bound by either a written or oral agreement to finish specific tasks or work and will not be able to “quit” without liability.

     3. Whether the worker engages in an occupation or business distinct from the employer’s. Independent contractors usually operate their own businesses and advertise themselves to the general public as ready to perform services similar to the one being performed for the principal. In other words, the principal is not the only source of the worker’s income or livelihood.

     4. Whether the type of work done by the worker is usually done under the employer’s supervision. If the work being performed is subject to extensive supervision, then the work is likely being performed by an employee. Independent contractors normally “specialize” in something and a specialist usually works without supervision.

     5. The skill required to perform the work. Workers who perform tasks which require little or no skill or experience are generally supervised. Supervision infers an employer-employee relationship.

     6. Who provides the instrumentalities, tools and place of work. If the tools, instrumentalities and facilities needed for the work are provided by the employer, this may indicate an employer-employee relationship.

     7. The length of time for the performance of the service. If the length of time for which the person is to perform the services is short (for example, only until a specific project is finished), this may indicate that the relationship is one of principal-independent contractor.

     8. Method of payment, or whether payment for work is by time, piece, rate or job. If the payment is made by the job, it is likely that the relationship is one of principal-independent contractor. Hourly or piece rate methods of payment usually indicate an employer-employee relationship.

     9. Whether the worker may hire others. If the worker has the right to hire others to assist in the work, then the worker may be an independent contractor. Employees generally do not have this right.

     10. Whether the services are part of the employer’s regular business. If the services performed by the worker are a regular part of the business of the employer, the worker may be considered an employee. For example, if the employer is in the elderly care business, then the worker who actually cares for the elderly is an employee.

     11. Whether the parties believe they are creating an employment or independent contractor relationship. The employment status that the parties believe they are creating may be shown by a written or oral contract. However, any contract will be interpreted in view of the circumstances under which it was made and the conduct of the parties while the job is being performed.

     Correctly classifying a worker as a true independent contractor or employee may make a big difference in terms of compensation and benefits for employees and their families. Those classified as independent contractors in the workplace would be smart to inquire from an experienced employment attorney to know what they are really entitled under the law.

© Law Offices C. Joe Sayas, Jr.