People often come to us with the question of what is the definition of an employee under California law.
A common source of tension in the working relationship is the characterization of a worker as an employee or an independent contractor. It is frequently argued by some plaintiff’s bar attorneys in California that employers benefit economically from characterizing a worker as an independent contractor rather than an employee, and thus have financial incentive to do so. For instance, classifying an employee as an independent contractor may purportedly allow the employer to avoid payroll taxes, minimum wage, overtime and other hourly requirements, and various insurance requirements. On the other hand, the Courts have recognized that there are legitimate justifications for characterizing someone performing services as an “independent contractor,” and an argument can be made in some cases that the employer would have [unfairly] benefitted more by characterizing the person as an “employee,” undercutting the other party’s position.
The Workers’ Compensation Act only extends to injuries suffered by an “employee,” which arise out of and in the course of “employment.” (Cal Labor Code §§ 3600, 3700; see Cal. Const., art. XIV, § 4 (former art. XX, § 21).) The California Labor Code defines an “independent contractor” as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.” The affect of this concept may be far reaching. In other words, while the principal can control the objective of the independent contractor, the independent contractor controls the manner in which that objective is achieved and therefore is situated differently than the “employee”. The existence of a written contract classifying a worker as either an employee or independent contractor is often dispositive by itself, short of trial, but is given weight.
The California Supreme Court’s seminal opinion in S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal. 3d 341, 350 (1989), identifies the factors weighed by the court in determining whether a worker is an employee or independent contractor. While the court acknowledges that “the right to control work details” is the most important consideration, the court enumerates several “secondary” indicia of an employment relationship. Id. at 350-351. The secondary factors considered by the court include:
(1) whether the one performing services is engaged in a distinct occupation or business;
(2) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
(3) the skill required in the particular occupation;
(4) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
(5) the length of time for which the services are to be performed;
(6) the method of payment, whether by the time or by the job;
(7) whether or not the work is a part of the regular business of the principal; and
(8) whether or not the parties believe they are creating the relationship of employer-employee. Id. at 351.
Also, the court recognizes that an employer’s “right to discharge at will, without cause” is “strong evidence in support of an employment relationship.” Id. at 350.
The issue of whether a person is an independent contractor is not always clear.
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