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Employee Or Independent Contractor? Why The Distinction Matters

On Behalf of | Nov 1, 2017 | employment law

Many Californians prefer to work in non-traditional workplaces or under a non-traditional work structure. As such, there has been a dramatic increase in so-called “gig economy” jobs, or jobs on a freelance or short-term basis.

However, these environments come with some issues in terms of worker classification. Are workers in these non-traditional occupations employees, independent contractors or something else? This is the question at the root of numerous “wage and lawsuits” and administrative proceedings in recent years, and it is one that you would be wise to address as an employer.

Why proper classification is so important
Employees receive benefits, wage protection and other employment-related rights that independent contractors and freelancers do not enjoy. Classification also influences if and how taxes are taken out of a person’s pay.

Because of this, it is crucial that you properly classify workers to avoid accusations that you are not providing benefits or protections that you should be providing.

So are they employees or contractors?
In order to distinguish between employees and independent contractors, which are commonly miscategorized, employers can use the Borrello test. The test includes a list of factors that should help an employer determine whether a person is an employee or contractor. The factors include:

  • How much control an employer has over the worker, the work done and how it is done
  • Whether the person can work for other companies
  • Whether the work performed is standard and/or part of regular business
  • Whether the work demands special skills
  • How long the job will last
  • Whether the person is paid by time or by project

Addressing these and other factors should help an employer determine into which category a worker falls.

Doubts and mistakes can still arise
This test is not perfect, especially when it comes to gig economy jobs that already do not fit the traditional workplace model. As such, disputes and disagreements can still arise involving employee misclassification.

If you are an employer with questions about how to categorize your workers, or if someone has accused you of misclassification, it can be vital that consult an attorney about your options as soon as possible to avoid or minimize costly consequences.