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“Independent Contractors” Versus “Employees” Under California Labor Law

lorryThe precise nature of the legal relationships between an employer and the people who work for it depends on whether those workers are employees or independent contractors. Employees are often entitled to a broad range of legal protections regarding minimum wage, overtime hours, unemployment compensation, and other terms and conditions of employment. Independent contractors, on the other hand, are generally only entitled to whichever rights are defined in their contract. Misclassifying an employee as an independent contractor can result in substantial penalties under California law. See Cal. Lab. Code § 226.8. Recent court decisions in California have closely examined the distinction between employees and independent contractors as workers challenge their alleged independent contractor status.

The legal standard for determining whether someone is an employee or an independent contractor varies from state to state. California has adopted the common-law rule known as the “right to control” test, which examines whether the employer “has the right to control the manner and means of accomplishing the result desired.” S. G. Borello & Sons, Inc. v. Dep’t of Industrial Relations, 48 Cal.3d 341, 350 (1989). To put it in overly simple terms, if the employer has the authority to dictate when and where work is to occur, such as at the employer’s place of business between 9:00 a.m. and 5:00 p.m., the worker is probably an employee. If the worker has the autonomy to determine their own hours and location of work, they are probably an independent contractor.

Reality is rarely so simple, of course. The California Supreme Court acknowledged in Borello that the “right to control” test “is often of little use in evaluating the infinite variety of service arrangements.” Id. It identified eight additional factors that courts should consider, including whether the worker “is engaged in a distinct occupation or business”; which party “supplies the instrumentalities, tools, and place of work”; whether payment is made “by the time or by the job”; and whether the work is outside the scope of the employer’s “regular business.” Id. at 351.

Several recent California court decisions have cast uncertainty on the employment relationship in areas that were once generally assumed to be those of principals and independent contractors. Truck drivers frequently own their own rigs and work for trucking companies as independent contractors. State clean-air regulations, however, have restricted many older trucks from certain areas, including the state’s ports. This has resulted in disputes between trucking companies and drivers using company-owned trucks. A state appellate court ruled in 2015 that a group of truck drivers in this situation were employees, rather than independent contractors. Garcia v. Seacon Logix, Inc., 238 Cal. App. 4th 1476 (Cal. App. 2nd 2015).

Many companies involved in the “sharing economy” have also found themselves involved in lawsuits alleging misclassification. A federal court ruled that drivers for Uber, which operates a “ridesharing” mobile application, are “presumptive employees because they ‘perform services’ for the [company’s] benefit.” O’Connor v. Uber Technologies, Inc., 82 F. Supp. 3d 1133, 1135 (N.D. Cal. 2015). The court left the ultimate decision of the classification of Uber’s drivers up to a jury.

Employment attorney James G. Schwartz has represented the rights and interests of Bay Area businesses and business owners for the past 40 years. To schedule a free and confidential consultation with an experienced and skilled business advocate, contact us today online or at (925) 463-1073.

More Blog Posts:

California Appellate Court Affirms Injunction in Business’ Trespass Lawsuit Against Labor Union, Pleasanton Business & Commercial Law Blog, July 15, 2016

Employers in California May Not Enact “Use It or Lose It” Policies for Accrued Vacation Time, Pleasanton Business & Commercial Law Blog, January 29, 2016

California Fair Pay Act Takes Effect at the Beginning of 2016, Pleasanton Business & Commercial Law Blog, January 15, 2016

Photo credit: Clker-Free-Vector-Images [Public domain], via Pixabay.