When you perform work for someone else in California, that party must classify you as either an employee or an independent contractor. There are some distinct and important differences between the two types of workers. It is also very important that your employer gives you the correct distinction.
Employee misclassification occurs when an employer labels an employee an independent contract, rather than a formal employee. There are several reasons your employer may do this.
Why employee misclassification occurs
If your employer misclassifies you as an independent contractor, he or she may do so because this may save him or her money. When you are an independent contractor, rather than an employee, your employer does not have to pay unemployment benefits. Your employer also enjoys certain tax savings by classifying you as an independent contractor. He or she does not have to extend your workers’ compensation in the event that you get hurt as an independent contractor, either.
How the ABC test determines employment status
Something called the “ABC test” helps determine whether you are an employee or independent contractor under California law. For you to be an independent contractor, the test must show that you are free from the direction and control of the party that hired you. It must also show that you perform work that is different from that typically performed by the business. Finally, the test must show that you have customary engagement in the trade, occupation or field in which you perform work.
Unless all these circumstances apply, your California employer should not classify you as an independent contractor.