Employers many times will take different paths to make sure that the services and products demanded by customers and clients are supplied an executed in a timely manner. This includes hiring employees directly as well as using the services of other businesses, such as internet service providers, couriers, or food services. In between these two falls the independent contractor. While an employer is required to provide workers’ compensation insurance for all employees with few exceptions, an employer is not required to provide workers’ compensation insurance for independent contractors. Penalties for failing to adhere to this provision are severe, so it is crucial that an employer have a firm understanding of the differences between an employee and an independent contractor.
California Labor Code section 3353 defines “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.” This statute essentially means that to be an independent contractor, the person has to have control over the way in which a job is accomplished. Accordingly, if an employer is telling an independent contractor not only what the job is to be done but also how and when to do the job, it is very possible that the person is actually an employee. The California Supreme Court also laid out a multi-factor test in S.G. Borgello & Sons, Inc. v. Dept. of Industrial Relations, which discusses a long list of other potential contributing inquiries. These include such issues as whether the person performing the services is also engaged in another business that is separate from that of the employer, whether the service performed is part of the regular business of the employer, who supplies the work materials for the job, and whether the service rendered requires special skills.
There is an automatic presumption under Labor Code that a person is an employee. If the employer disputes this, then it is up to the employer to prove that the person is an independent contractor. The most straight-forward way to demonstrate that a person is an independent contractor is to have a written agreement between the business and the contractor that specifies this. However, the employer must be aware that simply calling a person an independent contractor does not make it true, as a court will look beyond the agreement to what the parties actually did in order to make the final determination.
If you have questions about your business and making sure it is in compliance with rules regarding independent contractors, call us today at (714) 516-8188. I have experience in helping my clients understand the rules and regulations for any business.