7 Tests to Determine if that Independent Contractor You’ve Hired is Actually an Employee

Now that’s a long title.

But you’re not here for the title. You’re here for the content.

It happens to even the most careful of employers. You think you have hired an independent contractor only to find out later on that the person you hired should have been classified as an employee. You did your research. You read the California statute for independent contractors. The language is simple, right? “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.” California Labor Code §3353. You figured that just meant a person who performs work independently and isn’t subject to your company’s rules. Or, to make matters worse, you thought that meant anyone who is not exclusively your employee but can work for other employers at the same time. However, while you may think this misclassification between independent contractor and employee is just an honest mistake, the difference can have a huge impact on your business—and your finances. After all, one simple misclassification can mean that you may owe back workers compensation, taxes, benefits, and unemployment insurance.

So what’s the point here?

Don’t misclassify your employees as independent contractors—or you will greatly regret it later on.

But what is an employer to do? Well, the best thing you can do is hire an attorney who can help you with employer protection, or someone similar. Before you contact that lawyer, though, there are a few questions you should ask about the employment relationship to help you see if you really have hired an independent contractor or if you’ve actually just hired a new employee.

  • Is the person performing the services engaged in a distinct occupation or business?
  • In the person’s occupation or business, considering factors such as the locality, is the kind of work usually done under the direction or supervision of the principal or is the work usually done by a specialist without supervision?
  • How much skill is required for the person’s occupation?
  • Does the person supply their own tools, instrumentalities, and place of work, or are the tools, instrumentalities, and place of work supplied by you?
  • How long will the services be performed?
  • Is the type of work you’re hiring the person for of the same type of work your business regularly does?
  • Do you believe you are creating an employer-employee relationship? Does the person you’re hiring believe they are entering into an employer-employee relationship?

The foregoing questions come from S.G. Borello & Son, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341, 351, and the following should not be construed as legal advice in any way. I am providing you a very generalized look at California law on the topic. Also keep in mind that the Federal tests for an independent contractor relationship are different.

Image Courtesy: Victor1558

Eric Norton

Eric Norton

Business & Trademark Attorney at Norton Law Corporation
Eric Norton is a business and trademark attorney, and the founder of Norton Law Corporation, a modern law firm designed to help entrepreneurs with their legal needs. Eric also enjoys photography, gaming (tabletop and video), watches, and good design.
Eric Norton

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  1. MaGuire
    MaGuire says:

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  1. […] love to hire only independent contractors. Too bad that’s just about impossible given the differences between employees and independent contractors. But that’s a story for another blog […]

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