Independent Contractor Lawyer Los Angeles, California
Do you feel your employer has incorrectly classified you as an independent contractor to avoid paying certain benefits and overtime pay? If so, you should contact one of the top Los Angeles independent contractor attorneys in Los Angeles at Colby Law Firm.
Our dedicated team understands that it can be confusing to understand all of the different nuances to being an independent contractor, especially if you are one of the millions of individuals working within the gig economy such as a ride-share driver or food delivery individual.
Regardless of your situation, Colby Law Firm is here to help you understand your rights and fight alongside you to ensure you receive the compensation you deserve. When you need an independent contractor lawyer in Los Angeles you can trust, contact Colby Law Firm.
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Independent Contractor or Employee
An agreement between the hiring entity and worker, the labeling of the worker (i.e., “employee” versus “independent contractor,” “freelancer,” or “consultant”), nor the tax forms used — i.e., 1099 for contractors versus W-2 for employees — is outcome determinative. The working relationship must satisfy one of several legal tests to classify the worker as a contractor.
Classifying a worker as an independent contractor versus an employee is legally significant because almost all worker legal protections – e.g., minimum wage, overtime, anti-discrimination, insurances, and taxes – depend on if the worker is a contractor or employee in the eyes of the law.
Because of tax benefits and the flexibility of working for themselves, many workers prefer contractor status. Businesses often prefer contractors for the flexibility in structuring payment, and to avoid many costly legal obligations for employees. Since worker and business incentives align on the contractor preference, many workers end up “misclassified.”
The Test for Independent Contractor or Employee
The applicable independent contractor or employee test depends on legal right at issue – e.g., unpaid wages, breaks, harassment, discrimination, unemployment insurance benefits, workers’ compensation insurance benefits, taxes, etc. – and the nature of the relationship between the entity and worker.
Before the “ABC test” was introduced in 2018, the multi-factor “manner and means” test that the California Supreme Court set forth in in S. G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal.3d 341 (1989) (“Borello”) was used across the board. Now, the Borello multi-factor test is used as a fallback when the ABC test does not apply because of a statutory exemption.
In 2018, the California Supreme Court introduced the ABC test in the Dynamex case; in 2019, the Legislature codified the ABC test via Assembly Bill 5 (“AB 5”); and, in September 2020, Assembly Bill 2257 (“AB 2257”) rewrote much of AB 5. Unless there is a statutory exemption, the ABC test is used for legal rights arising under California wage and hour, workers’ compensation insurance, and unemployment insurance law.
Other classification tests are used for: discrimination and harassment protections under the California Fair Employment And Housing Act (Government Code section 12940(j)(5)); employment protections under federal statutes (Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992)); and federal tax purposes (Internal Revenue Service, Publication 15-A: Employer’s Supplemental Tax Guide (2017)).
Borello: Multi-Factor “Manner and
From 1989 to 2018, the classification test for contractor or employee that California courts, the California Labor Commissioner, and the California Employment Development Department used was the multifactor test established by the California Supreme Court in S. G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal.3d 341 (1989) (“Borello”).
The Borello test applied until 2018, when Dynamex introduced the ABC test for certain purposes. The Borello test remains in place as the applicable test when a statutory exception to the ABC test applies. More simply, businesses that meet a statutory exception to the ABC test must still satisfy the Borello test to avoid the consequences of misclassifying an employee as a contractor. Labor Code section 2775(b)(3).
Businesses prefer the Borello test because the many factually-intensive factors can complicate worker claims and class certification efforts, and to avoid the “B” element of the ABC test
The California Labor Commissioner describes the Borello test as: “…[relying] upon multiple factors to make [the contractor or employee] determination, including whether the potential employer has all necessary control over the manner and means of accomplishing the result desired, although such control need not be direct, actually exercised or detailed. This factor, which is not dispositive, must be considered along with other factors.
- Whether the worker performing services holds themselves out as being engaged in an occupation or business distinct from that of the employer [yes leans towards contractor];
- Whether the work is a regular or integral part of the employer’s business [no leans towards contractor];
- Whether the employer or the worker supplies the instrumentalities, tools, and the place for the worker doing the work [yes leans towards contractor];
- Whether the service provided requires a special skill [yes leans towards contractor];
- The kind of occupation, and whether the work is usually done under the direction of the employer or by a specialist without supervision [without direction or supervision leans towards contractor];
- The worker’s opportunity for profit or loss depending on their managerial skill [more opportunity leans towards contractor];
- The length of time for which the services are to be performed [shorter time leans towards contractor];
- The degree of permanence of the working relationship [less permanence leans towards contractor];
- The method of payment, whether by time or by the job [by the job and not by time leans towards contractor];
- Whether the worker hires their own employees [yes leans towards contractor];
- Whether the employer has a right to fire at will or whether a termination gives rise to an action for breach of contract [no to right to fire at will leans towards contractor]; and
- Whether the worker and the potential employer believe they are creating an employer-employee relationship (this may be relevant, but the legal determination of employment status is not based on whether the parties believe they have an employer-employee relationship) [no leans towards contractor].”
The “ABC” Test
In Dynamex Operations West, Inc. v. Superior Court (“Dynamex”), the California Supreme Court revisited the proper classification test for purposes of claims under the California Wage Orders, which cover overtime and breaks (but not expense reimbursement). The Dynamex Court ruled that the multi-factor test established in Borello was not the proper test, and that the ABC test applied in these circumstances. In 2019, AB 5 codified the Dynamex ABC test in California Labor Code section 2750.3.
The ABC test applies for purposes of the Unemployment Insurance Code and all provisions of the Labor Code for purposes of workers’ compensation insurance. Simply put, to legally classify a worker as an independent contractor and not an employee, a company must prove that the worker is free from the company’s control, performs work outside the company’s primary business, and is regularly engaged in the trade the worker is hired for, independent of work for the company.
Under the ABC test, a worker is presumed to be an employee unless the business proves each of the three elements:
The worker is free from the control and direction of the company in performing work, both practically and in the contractual agreement between the parties; and
The worker performs work that is outside the usual course of the company’s business; and
Customer of Worker
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.
Exceptions to the ABC Test
The ABC test has exemptions built in. If the work relationship meets the requirements for an exemption to the ABC test, instead the the Borello multi-factor test applies.
Businesses that meet a statutory exception to the ABC test must still satisfy the Borello test to avoid the consequences of misclassifying an employee as a contractor. Labor Code sections 2775-2787. Companies prefer the Borello test because the many factually-intensive factors can complicate worker claims and class certification efforts, and to avoid the “B” element of the ABC test.
A business entity, including an individual operating as a sole proprietorship, other than a licensed contractor, may be classified as a contractor (subject to the Borello test) if all of the following criteria are satisfied (Labor Code § 2776):
The provider is free from the control and direction of the contracting business;
The provider is free to contract with others for the same or like services;
Services are provided directly to the contracting business and not that business’s customers unless employees of the provider are performing the services for the customer and the provider regularly engages in this business;
The provider advertises and holds itself out to the public as available for like services;
There is a written contract that includes certain required terms (payment amount or method and due date);
The provider uses its own tools, vehicles, and equipment, not including any proprietary materials that are necessary to perform the services;
The provider has a business license or tax registration if required in the location where the services are performed;
The provider negotiates its own rates; and
The provider maintains a business location separate from the hiring entity (which may include the contractor’s home);
The provider can set its own hours and work location consistent with the nature of the work.
Professional Services Exemption
A worker may be classified as a contractor (subject to the Borello test) if they meet all of these criteria (Labor Code § 2778):
- Maintains a business location, which may be their residence, separate from the hiring entity, but with certain exceptions (stated below) the person may choose to perform services at the hiring entity’s location;
- Has a business license or tax registration if required in the location where the services are performed and a professional license if required by the profession;
- Has the ability to set or negotiate their own rates;
- Outside of project completion dates and reasonable business hours, can set their own hours;
- Is customarily engaged in the same type of work for another hiring or holds themselves out to potential customers for that type of work;
- The work is for “professional services” which means any of the following:
- Marketing, provided that the work is original and creative.
- Administrator of human resources, provided that the work is predominantly intellectual and varied.
- Travel agent, provided they either are regulated or are exempt from registration.
- Graphic design.
- Grant writer.
- Fine artist, defined as someone who creates work of art appreciated for the imaginative, aesthetic, or intellectual content, including paintings, sculptures, etc.
- Enrolled agent licensed by the U.S. Treasury Department.
- Payment processing agent through an independent organization.
- Still photographer, photojournalist, videographer, or photo editor who does not work in motion pictures (including theatrical or commercial productions, broadcast news, television, and music videos) who works under a written contract specifying the rate of pay and deadline for payment, is not replacing an employee who performed the same work at the same volume for the hiring entity, does not primarily perform the work at the hiring entity’s location, and is not restricted from working for other entities. [The previous limit of 35 submissions per year has been removed for this exception.]
- Freelance writer, translator, editor, copy editor, illustrator, newspaper cartoonist, content contributor, advisor, producer, narrator, or cartographer for a journal, book, periodical, evaluation, other publication or educational, academic or instructional work in any format or media who works under a written contract specifying the rate of pay, deadline for payment, and intellectual property rights, is not replacing an employee who performed the same work at the same volume for the hiring entity, does not primarily perform the work at the hiring entity’s location, and is not restricted from working for other entities. [Again, the 35-submission limit has been removed for this exception.]
- Licensed esthetician, electrologist, manicurist, barber, or cosmetologist.
- Specialized performers hired by a performing arts company or organization to teach a “master class” for no more than one week.
- Licensed real estate appraisers, licensed real estate agents (with caveats), home inspectors, and repossession agents.
Frequently Asked Questions
Can You Tell an Independent Contractor When to Work?
Ultimately, to be an independent contractor you must be in business for yourself and not subjected to the rules and regulations of a single employer. Here’s an example, if you have “only one client” who dictates both your schedule and work location (“be here every day by 8:00 am and stay until 5:00 pm) then you are most likely not an independent contractor.
Several government agencies have given guidelines to help determine this status with a test known as the “Right of Control” test. You are an employee if the company who hired you has the right to direct and control your performance. You are an independent contractor if the hiring firm can only accept or reject the final results of your work. This means that if you are an independent contractor, you cannot be told when to work.
This is not to say however, that guidelines and requests cannot be given. For example, your hiring firm needs you to be available a couple of times a week for routine status updates, and you and the firm agree and schedule those times. This would not make you an employee.
If you feel that your status as an independent contractor is unclear to your employer or that your employer is abusing the independent contractor regulations, please reach out to Colby Law Firm for a free and confidential consultation. It is a somewhat gray area for some independent contractors and hiring firms. Getting an attorney who can assist you with your situation will help you tremendously. Contact Colby Law Firm today.
Should I be Classified as an Independent Contractor or an Employee?
In California, efforts have been made to clarify who qualifies as an independent contractor and who qualifies as an employee. One recent area of focus has been online platforms that hire individuals via their portals such as companies that provide delivery or driving services. Since this area is relatively new and still evolving it can be tricky to know if you would qualify as an independent contractor or an employee.
There is an informal test that can be used to determine if a person should be identified as an employee or an independent contractor. The “Right of Control” test, which has been used by a number of government agencies including the IRS can help simplify your status. You are an independent contractor if the hiring firm can only accept or reject the final results of your work. You are an employee if the company who hired you has the right to direct and control your performance. In laymen’s terms, who is calling the shots? Independent contractors are in control of all aspects of their business. Employees are not.
There have been times when a person has been working as an independent contractor, but they don’t qualify as an independent contractor. Employers may have done this out of ignorance, or for any number of reasons. If you feel that your status as an independent contractor is incorrect or that your employer is abusing the independent contractor status, please reach out to Colby Law Firm for a free and confidential consultation. Getting an attorney who can assist you with your situation will help you tremendously. Contact Colby Law Firm today.
Can I be Titled an Independent Contractor After Being an Employee?
If you have been working as an employee and are now being moved over into an independent contractor position for the same company, this is not in violation of any state laws as long as it is done correctly. To be done correctly, your new independent contractor role must truly qualify as an independent contractor position. Your employer cannot keep you in the same position with the same duties and simply change your status from employee to independent contractor. To be an independent contractor you must not have your work, your schedule or your work product under the direct control of the company you are working for.
If you believe that your position has not changed in any way yet your employer has shifted you to an independent contractor, please reach out to Colby Law Firm for a free and confidential consultation. We can review what has occurred with you and help you determine your course of action.
Aaron Colby started Colby Law Firm to represent employees after spending 15 years representing employers. This has given him the unique advantage in knowing how employers work. He works for you. Contact Colby Law Firm for a free and confidential consultation.