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What separates an employee from an independent contractor?

On Behalf of | Feb 8, 2021 | Blog

You enjoy your work with your California-based employer, but looking at your pay stubs, you suspect the company misclassified you. What differentiates standard employees from independent contractors?

Fundera dives into the differences between the two employee classifications. You may have a wage and hour violation claim and not realize it.


One of the biggest differences between employees and independent contractors is how employers handle taxes for the two. For standard employees, companies must withhold Social Security, state, Medicare, local and income taxes from their paychecks. Employers also pay some taxes on an employee’s behalf.

If the company hired you as an independent contractor, you cover your own taxes from whatever pay you receive. Specifically, you must pay both the employer and employee portion of your state and federal taxes.

Common law

Besides taxes, you may also refer to common law to determine your proper employment status. If your employer dictates how you work and what you work on, then you qualify as an employee. The same applies if the company supplies you with materials and equipment to carry out your work duties. Do you receive benefits such as vacation time, paid time off and health insurance? If so, you work as an employee.

If you have the freedom to set your own schedule and decide your own work strategy, then you classify as an independent contractor. Contractors also work for multiple clients and customers, not just one. If you help the general public as a trade or building contractor or financial or health care professional, then you may meet the criteria for an independent contractor.

Do not let your employer get away with misclassifying you. It could be an innocent mistake, or it may be an effort to avoid paying you a fair wage.

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