California Independent Contractor FAQs

What You Need to Know About California Independent Contractors

The contested difference between independent contracts and traditional employees has led to California independent contractor laws. Here’s everything you need to know about California independent contractors.

While there are several benefits of working as an independent contractor, there are also many downsides. Since many burdens fall on independent contractors that do not fall on employees, it is easy for unlawful companies to abuse the legal system and it is thus important for independent contractors to understand their rights.

What is an independent contractor in California?

California’s contractor laws state that an independent contractor is a person or business that provides a specific service to another company in exchange for compensation. It further says that the independent contractor is under managerial control for results and not how he or she accomplishes the work. In other words, independent contractors in California have flexibility and control over how they work, including time and location, without feedback from management. The company they serve can only exert control over the results they are producing.

What is the difference between an independent contractor and an employee in California?

Independent contractors and employees may perform similar tasks, but their relationships with the company are very different. The primary difference is that an independent contractor has a right to act as his or her own boss rather than the employer dictating how, where, and when they perform their service. Employees receive benefits, tax withholdings, and employee protections, including workers’ compensation, whereas independent contractors are responsible for these elements.

What rights are employees entitled to?

Employees are entitled to a wide variety of protections under federal and state law. Among other things, the following rules apply to employees, but not to independent contractors:

Employers must withhold state and federal payroll taxes for their employees
Employers must provide workers’ compensation insurance for their employees
Employees are eligible for unemployment insurance benefits from the state
Employees are entitled to wage and hour protections, including minimum wage and overtime
Employees are protected under federal and state anti-discrimination laws.

What is AB 5?

California Assembly Bill 5, or AB 5, is a legislative act passed by Governor Newsom in September 2019 and went into effect in 2020. AB 5 requires companies to reclassify independent contractors as employees with a few exceptions to the rule. The bill was designed to increase regulation over companies that hire gig workers in large numbers, including DoorDash, Postmates, Uber, and Lyft. Companies must utilize a three-pronged test to show whether the workers should be classified as independent contractors or employees.

What is the ABC Test for independent contractors in California?

An individual is an independent contractor in California only if they meet all three requirements of the test:

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

What should someone do if they have been misclassified?

If an independent contractor believes that they have been misclassified, they may be owed lost work wages, overtime, benefits, and reimbursements. These financial losses will depend upon an evaluation of the case to establish the types of employment in which you are engaging. Speak with an attorney to help determine legal options for moving forward.

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