California law is quite clear about an employer’s responsibility to carry workers’ compensation insurance. With very few exceptions, California employers of almost any size are required to carry workers’ compensation insurance for all employees. There can be complicating issues, however, as not everyone who works for a business is considered an “employee” for purposes of this requirement. For example, independent contractors are not employees, and therefore employers do not have to carry workers’ compensation insurance that would cover independent contractors or their work-related injuries. Employers will sometimes misclassify an employee as an independent contractor, which can result in harsh penalties for the business and its owner. Unfortunately, there is not a statutory definition of “independent contractor” that is applicable to workers’ compensation. Instead, California courts have set out a list of factors to consider. Although labor code section 3357 makes the presumption that a worker is an employee, courts will look at other realities to determine if this is accurate. The California Supreme Court adopted a test in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations that is still important law concerning how to determine if a worker is an employee or an independent contractor.
In Borello, the California Supreme Court was met with the question of whether agricultural workers who were engaged to harvest cucumbers through a “sharefarmer” agreement were independent contractors or employees. The Borello court created an “economic realities” test. Under this test, the most important issues is the control that the employer or principal may exercise over the worker. The focus on what kind of control pivots on not only the type of work that is to be done, but also the manner and way in which it is actually done. In other words, if the employer is telling a worker that he or she must perform the work during certain hours and in a certain location, it makes it more likely that worker is actually an employee, and not an independent contractor. There is a long list of other factors to consider, including whether or not the type of work to be done is the type usually done by the employer, whether the work done requires a special skill set, and whether the worker is to be paid according to the job or the time spent.
If you have concerns or questions about properly classifying your employees, contact me today at (714) 516-8188. I look forward to answering your questions and discussing your business.