In California, the distinction between being classified as an employee or an independent contractor is significant, as this divide impacts workers’ rights and benefits. Misclassification can lead to the loss of critical benefits and protections such as health insurance, workers’ compensation and unemployment benefits. As a result, it’s important to understand if you’ve been properly classified – or incorrectly misclassified – if you work as an independent contractor.
The first step in determining your classification is to understand the legal criteria that differentiate an independent contractor from an employee. California applies the “ABC test” established under Assembly Bill 5 (AB5) for this purpose. According to this test, a worker is considered an employee unless the business that has hired the worker in question can prove three elements:
- A: The worker is free from the control and direction of the hiring entity in connection with the performance of their work.
- B: The worker performs work that is outside the usual course of the hiring entity’s business.
- C: The worker is customarily engaged in an independently established trade, occupation or business.
You’ll want to reflect on the amount of control your employer has over your work. Are you required to follow specific instructions on how to complete a task? Do you have set working hours and are you required to work at a specific location? If the answer is yes, you might be more of an employee than an independent contractor.
Finally, you’ll need to ask whether your work falls within the core operations of the business. For instance, if you’re a graphic designer working for a design firm, you’re likely an employee. However, if you’re a graphic designer doing a one-off project for a restaurant, you’re probably an independent contractor.
If you’ve been misclassified, it’s time to act
Sometimes, employers intentionally misclassify workers to save money. Other times, employers unintentionally misclassify workers because they’re simply misinformed or because a worker’s situation evolves over time to reflect circumstances that should render them a fully recognized employee. Either way, if you have been misclassified as an independent contractor, it’s time to seek legal guidance to better understand your rights and options under the law.