Challenges Arise When Classifying Gig Economy Workers

If you operate a mid-to-large sized business in California, you likely have a diverse workforce consisting of different types of workers. While many of them could be full-time, regular employees, it is becoming increasingly common for such companies to hire freelancers or independent contractors as well.

This hiring trend is part of the "gig economy," which refers to the rising number of people who work in independent or short-term capacities. Due to the fact that this segment continues to grow so quickly, there have been more companies across the country confronted with disputes regarding worker classification.

Why classification matters

The way an employer classifies a worker is significant for many reasons - particularly in California. First, it can define the longevity of the role. Will a person be on staff indefinitely as a regular employee? Will the person be working for the company for a single project as a freelancer? Is there an end date to his or her employment defined in a contract?

Classification also matters because it dictates what (if any) benefits and protections a worker receives. In general, employers are not required to provide things like health insurance, time off or a minimum wage to freelancers and contractors. Further, these workers may not be covered under certain federal laws that protect employee rights in the workplace.

Finally, classification reflects the expectations of the role. An employee typically has a manager, a defined schedule and receives specific training. Non-employees often have more control over their schedules as well as the jobs they accept.

How the gig economy contributes to employment disputes

As discussed in this NPR article, workers in a gig economy can take on attributes of both employees and non-employees. This can make it easy for confusion and debate to arise.

California courts and administrative agencies closely monitor how a worker is classified, generally relying on a multi-part test of various elements to determine whether a worker is an employee or independent contractor. Misclassifying a worker can result in a wage and hour lawsuit by the worker, as well as actions by governmental agencies seeking taxes, fees and penalties.

Consequently, it is important to properly classify workers to avoid trouble; but if you get into a dispute with a worker or governmental agency, you need to retain an attorney who can aggressively advocate on your behalf to minimize or eliminate the damage.

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