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How To Know if You are an Independent Contractor or an Employee

Just because you are being paid as an independent contractor doesn’t necessarily mean you are one in the eyes of the law. The difference can cost the workers thousands of dollars and rob them of labor protections, like overtime and workers' compensation.

If you're being paid as an independent contractor, you may already know, you pay a lot more in taxes than an employee does. That’s because you are considered as self-employed and responsible for your own payroll taxes. Labor laws like overtime, minimum wage and meal or rest periods don’t apply. Additionally, California’s anti-discrimination and retaliation laws protect employees, but not independent contractors.

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Employers oftentimes pay workers as independent contractors while treating them as employees. That’s called misclassification and it costs California approximate $7 billion in lost payroll taxes, according to Julie Su, the state’s Labor Commissioner.  

Last August, Su’s office cited a Glendale construction company over $6 million for willfully misclassifying 175 workers as independent contractors.

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Determining if you are illegally classified can be complex, but here are four factors to consider: 

  1. Does the employer control your work schedule? Generally an independent contractor sets the schedule and can’t be required to work certain hours. Employees, on the other hand, can.   

  2. Do you decide how the job will get done or are you taking direction and orders from the employer?

  3. Who supplies the location, tools and other materials to get the job done?  If the employer does, that could suggest an employee-employer relationship.

  4. Lastly, what is the permanence of the work relationship?

For more information on, visit the California Labor Commissioner’s page on worker misclassification.

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