California Independent Contractor Laws

A California independent contractor has different legal rights and obligations than an employee. Here’s what you need to know about California independent contractor laws.

The contested difference between independent contractors and traditional employees has led to a plethora of California independent contractor laws. Independent contractors engage in business activities as independent entities and are not employees of the hiring company.

Defining an Independent Contractor

Independent contractors are their own bosses. Generally, they have more independence than the standard employee. It includes roles such as the following:

Graphic designers
Freelance writers
Construction workers
Consultants

Traditionally, an independent contractor usually enjoys the luxuries of the following:

Paid by the job
Sets own working hours
Provides own tools and equipment needed to perform work
When they work
Where they work
Provide skills or expertise not part of a company’s usual repertoire
Set their own feesPays own business and traveling expenses
Hire and pay your own assistants
Earn a profit or suffer a loss as a result of own work for the company
Operate a truly independent business

Cons to Independent Contractors

Independent contractors do not enjoy the same rights under California law as employees. In fact, they are subject to the following:

Can be fired far more easily
Not entitled to overtime pay
Not entitled to minimum wage
May be required to work long, unbroken hours without extra compensation
Are ineligible for unemployment insurance
Are not protected by federal and state anti-discrimination laws

In contrast, employees who are protected by state and federal law must be paid at least the minimum wage, are entitled to receive overtime, and are eligible for unemployment insurance. Other benefits and protections available to employees but not to independent contractors include the following:

Retirement and health benefits
FICA tax payments
Workers’ compensation insurance

Understanding California Assembly Bill 5

California Assembly Bill 5, or AB 5, is a legislative act passed by Governor Newsom in September 2019. It came into effect on January 1, 2020, and requires companies to reclassify independent contractors as employees with a few exceptions to the rule.

The bill was designed to increase regulation over companies hiring gig workers in large numbers like DoorDash and Uber. Companies are now required to utilize a three-pronged test to show whether the workers should be classified as independent contractors or employees.

The ABC Test for Independent Contractors in California

The ABC test assumes a worker is an employee unless the test shows otherwise. An individual is an independent contractor in California only if they meet all three of the following requirements:

The worker remains free from managerial direction and control related to the worker’s performance
The worker performs duties outside the scope of the company’s course of business
The worker primarily engages as an established business and performs the same work as for the company

Fair Employment and Housing Act

AB 51 prevents companies and employers from requiring employees and job applicants to agree to arbitration for violations involving the Fair Employment and Housing Act. It also prevents employers from engaging in retaliatory behavior against employees who refuse to enter into an arbitration agreement as a term or condition of employment.

In addition to opening up, other civil remedies for Fair Employment and Housing Act claims, the statute also provides for reasonable attorneys’ fees reimbursement and injunctive relief. Employers violating these employment laws can be criminally charged. These provisions also include those involving misclassified workers under California labor laws.

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