Read this if you're classified as an independent contractor
How are you classified at work, and what does that mean for your income and your benefits? Californians are voting on that very issue this election year, and while the voting results will affect only one state, job classification impacts workers everywhere. I'm sharing below a post I wrote last year because it's more relevant than ever in today's work environment.
Working from home feels ideal to some people, and it's the reality for many right now. It often suits working mothers: you can pick the kiddos up from school and relieve the nanny at an earlier hour if the kids are old enough to let you work in peace. You avoid a commute, giving you more time in your day to be both a mother and a productive worker. But hey! It also gives you more time to work. So the benefit to you and your {cough, cough} employer are pretty much equal.
But who’s benefiting from classifying your status as an independent contractor rather than as an employee? That’s right. Not you. Your employer.
Let’s get right to the heart of the matter
Are you or are you not an employee, entitled to employment benefits like health insurance, free lunches, promotions, bonuses (guaranteed or performance) at the high end, and basic worker protections at every end of the labor market? As the California Supreme Court has noted:
If workers are properly classified as employees,
the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and . . . complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. The worker then obtains the protection of the applicable labor laws and regulations.
If they’re wrongly classified as independent contractors, the hiring business bears no responsibility except paying the worker for the work produced.
Which are you? Employee or Independent Contractor?
In deciding how workers should be classified under California’s labor laws, the California Supreme Court used a test employed by other courts - the ABC test. Under the ABC test, a worker is presumed to be an employee unless the worker:
(A) Is free from control and direction of the hirer in connection with performing the work, both under contract and in fact;
(B) Performs work outside the usual course of the hiring entity’s business; and
(C) Customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hirer.
The “hirer” (i.e., your boss) might be the business that hired you, say Google. Or it might be a business that supplies workers to Google. Or it might be a consulting business that provides advice to Google based on the work done by the consulting business’ workers.
In all of these scenarios, the definition (in California) of an “employee” is the same although the “remedy” for misclassification may well only be imposed on your “boss,” i.e., the consulting firm, labor contracting firm or firm for whom you are directly working.
Let’s take this step by step
Does your “boss” control and direct the time and manner in which you do the work?
Are you required to work a certain number of hours a day or are you simply required to deliver your work product on your own time even if there’s a deadline for its delivery? Are you required to be on call during certain periods of time, say 9 to 5 or 8 to 4? Are you required to follow the instructions of your “boss” about the manner in which you produce the work product, i.e., are you required to follow rules or forms or instructions? If you say yes to any of these, you are likely an employee under California law. Not an independent contractor.
Are you performing work that is not typically done by your employer?
If you work for a consulting firm that provides, say, coding services to one or more clients, you are performing work directly within the work typically done by your employer - coding. If you work for, say, Google, and are providing coding services to it, that is clearly work that is typically done by Google. In these situations, you are likely an employee under California law. Not an independent contractor.
Do you ordinarily engage in an “independently established trade, occupation, or business of the same nature as the work performed for the hirer.”
That question isn’t answered “yes” if you are simply doing something you are skilled at doing. Let’s stay with coding and focus on the word “independently.” In other words, aside from your current work as an independent contractor do you otherwise have an “independent trade” (think plumber). If not, do you usually engage in an independent occupation, i.e., not as an employee but as a self-employed person. Consulting, for instance, is an independent occupation. Ditto for engaging in an “independent business.” Once again, if you haven’t established your own coding business but are working on someone else’s behalf to serve their business, you are likely an employee and not an independent contractor.
What the federal government says
So far, we’ve been talking about California law. So you might be interested in what the federal taxing authorities have to say about this. Here’s what the IRS says, verbatim:
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
The answer is not litigation - it’s negotiation
These issues often end up in court. But litigation is expensive, time-consuming, emotionally scarring and generally ineffective to deliver to you what you deserve.
We have negotiated solutions to these problems. Solutions contained in roadmaps and scripts based on your precise situation, geared to your communication style and applied gently rather than adversarially.
We’ll continue to discuss this issue in future blog posts because the culture is changing in California among tech giants. And California tech giants have work relationships with contingent, part-time and temporary workers who often are not being treated like the employees they are.