Are Independent Contractors Protected Under California Employment Laws?
In the ever-evolving landscape of employment and labor laws, the classification and protection of independent contractors in California have become a topic of great significance. California, known for its progressive stance on workers’ rights, has implemented a series of laws aimed at providing protection to independent contractors, while still distinguishing them from traditional employees.
This article explores California’s independent contractor law, shedding light on the rights and responsibilities that come with this unique classification.
Are your benefits as an independent contractor not given by your employer?
Understanding Independent Contractors
The nature of work has transformed significantly in recent years, with a growing number of individuals opting for freelance and contract-based arrangements. This shift has prompted legal discussions around the classification of workers, particularly independent contractors, and the extent to which they should be protected under employment laws.
Independent contractors, often referred to as freelancers or self-employed individuals, operate independently and provide services to multiple clients or entities. Unlike traditional employees, these types of workers maintain a level of autonomy over their work, determining their schedules, methods, and tools.
While this independent contractor arrangement offers flexibility, it also raises questions about the protections and benefits these individuals are entitled to under employment laws. They can be terminated with relative ease and are not entitled to receive overtime compensation or even the minimum wage. This may lead to extended, uninterrupted work hours without additional remuneration or protection for their employment status.
Furthermore, they are ineligible to access unemployment insurance, health benefits, and social security benefits and lack the safeguard of federal and state anti-discrimination statutes.
California’s AB 5: The ABC Test
Assembly Bill 5, also known as AB 5, was enacted in California to address concerns related to the misclassification of workers as independent contractors.
Also known as the Gig Worker Protection Law, it established a three-part “ABC test” that sets criteria for determining worker classification. To be considered an one, a worker must meet all three criteria:
A: The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
B: The worker performs work that is outside the usual course of the hiring entity’s business.
C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Exemption to the ABC Test
AB 5 outlines provisions wherein specific job categories are excluded from the application of the ABC test, opting for an alternative assessment method to ascertain the independent contractor status of workers within those sectors. According to California Labor Law, the following professions are granted exemptions:
- Medical practitioners such as doctors, surgeons, dentists, psychologists, podiatrists, and veterinarians
- Legal professionals including attorneys
- Insurance brokers and accountants
- Salespeople compensated through methods other than hourly wages
- Investment advisors and real estate brokers
- Engineers and architects
- Private investigators
However, while individuals employed in the aforementioned domains are exempted from the ABC test, they are still required to meet the criteria for independent contractor classification. This was established by the California Supreme Court’s landmark ruling in the 1989 case of Borello vs. Dept. of Industrial Relations, where 50 cucumber harvesters were not granted workers’ compensation as they were considered independent workers.
California AB 2257: An Addendum to AB 5
The enactment of AB-2257 signifies a significant development in the realm of employee classification in California. While maintaining the ABC test as the default criterion for determining employment status, AB-2257 introduces a host of new exemptions that broaden the scope of individuals eligible to work as independent contractors in California within the state.
Key changes and exemptions are:
- Exempts an array of entertainment industry and music industry -related positions from the ABC tes. Professionals from the entertainment industry and music industry such as recording artists, composers, managers, engineers, and musicians can now engage in independent contracting without the constraints previously imposed by AB-5.
- Lifts restrictions that previously hindered independent contractors such as photographers, photojournalists, freelance writers, editors, and newspaper cartoonists. This revision fosters greater flexibility for creative professionals to operate as independent contractors in California.
- Introduces an exemption for Business-to-Business contractors, seasonal workers, and construction workers, recognizing their distinct working relationship. This exemption acknowledges that certain business relationships involve services provided by individual workers to a regular business, rather than in a traditional employer-employee dynamic.
- Removal of caps on editorial submissions, which formerly mandated that contractors transition to full-time employment after completing a specific volume of work. The new legislation promotes a more fluid arrangement while safeguarding against displacement of existing full-time employees.
Impact on Businesses and Workers
AB 5’s implementation sparked significant discussions and changes across various industries, particularly those heavily reliant on gig workers. App-based drivers, food delivery companies, and other similar platforms faced the challenge of reclassifying their workers and providing them with additional benefits and protections.
Rights and Protections
Despite their classification as independent contractors, individuals in California still enjoy certain rights and protections under state law. These include:
- Wage and Hour Laws: Entitled to receive timely payment for their services and are protected against wage theft and unpaid wages.
- Discrimination and Harassment Protections: Safeguarded against discrimination and harassment in the workplace, ensuring a respectful and inclusive environment.
- Occupational Safety and Health Standards: The right to work in a safe and healthy environment, free from hazards and risks.
- Workers’ Compensation Coverage: The right to purchase their own workers’ compensation insurance to provide coverage in case of injuries or accidents.
- Tax Implications and Reporting: Responsible for reporting their income and tax withholding, as they are considered self-employed individuals.
Challenges on the AB 5 Law
Despite its good intentions, AB 5 has not been without its challenges. The law’s application has sparked debates and legal disputes in various industries, particularly in the gig economy and freelance sectors.
Businesses and workers alike have grappled with the intricacies of worker classification and the potential economic impacts of the legislation. Striking a balance between protecting worker rights and allowing for flexible work arrangements has proven to be a complex endeavor,
Contractual Agreements and Legal Recourse
Independent contractors often enter into contractual agreements with their clients or employers, outlining the scope of work, payment terms, and other relevant details. In case of disputes or breaches of contract, independent contractors have the option to seek legal recourse through the California court system.
Misclassification of Workers
Under the Independent Contractor Misclassification Law, wrongful classification of workers as independent contractors, whether intentional or unintentional, are prohibited. They can have significant legal and financial consequences for employers. Businesses found to have misclassified their workers may be required to provide back pay, benefits, and other compensatory damages.
Lack of Traditional Benefits
While independent contracting offers numerous advantages, it also presents challenges and uncertainties. The lack of traditional employee benefits, such as health insurance and retirement plans, means that independent contractors must secure these essentials on their own. Additionally, the nature of gig work can be unpredictable, leading to fluctuations in income and job stability.
Employer Penalties and Workers Compensation
Ensuring fair compensation for individual contractors is an ongoing concern. The gig economy often relies on competitive pricing, which can lead to situations where contractors are underpaid for their services. It’s crucial for contractors to negotiate contracts that accurately reflect the value of their work and expertise, allowing them to sustain a viable income.
In California, it’s against the law for employers to wrongly say someone is an independent contractor when they should be an employee. If they do this on purpose, they can be fined between $5,000 and $15,000 for each mistake. If they keep doing it a lot, they could be fined even more, up to $25,000 for each time.
Compensation for Workers
If workers are wrongly called independent contractors instead of employees, they can ask for the things they should have gotten as employees. This includes compensation for things like not getting paid enough, working extra hours, missing breaks, and not getting rest time. Sometimes, they might also get their employment attorney fees and court costs paid for.
If someone gets let go from their job and they were wrongly called an independent contractor, they can ask for help from the government, raise this legal issue, and get unemployment benefits while they’re looking for a new job. If the government sees that they were called an independent contractor by mistake, they can get compensated, and the employer might have to pay a civil penalty.
Also, if a worker who was wrongly called an independent contractor gets hurt while working, they can still ask for help from the government to get money for their injuries. Bosses who don’t have insurance might have to pay up to $10,000 in fines or even go to jail for a year.
Need help in reviewing if your independent contractor agreement is violating the law?
FAQs on Independent Contractor Law in California
Can businesses still hire independent contractors in California under AB 5?
Yes, any business entity can still hire independent contractors, but they must ensure that the workers meet the criteria outlined in the ABC test to avoid misclassification.
What role does the degree of control on hiring play in worker classification?
The degree of control that the hiring entity has over a worker is an important factor in determining whether the worker is an employee or an independent contractor. The more control the hiring entity exercises over how, when, and where the work is done, the more likely the worker will be classified as an employee under AB 5.
What is the significance of a business license in relation to AB 5?
Having a business license is one of the factors that can help determine whether a worker is an independent contractor or an employee under AB 5. However, having a business license alone doesn’t automatically mean a worker is an independent contractor; other factors are also considered.
Can independent contractors file a wage claim in California?
Yes, independent contractors in California have the right to file a wage claim if they believe they have been unfairly compensated or denied wages by their hiring entity. However, the process and eligibility criteria for wage claims may differ for independent contractors compared to traditional employees. It’s advisable for independent contractors to seek legal counsel or guidance from labor agencies to understand their rights and options when it comes to filing wage claims.
Get Legal Advice Today
California’s approach to the protection of independent contractors under employment laws reflects the state’s commitment to fostering a fair and equitable working environment. While independent contractors and gig economy workers do not enjoy all the benefits and protections afforded to traditional employees, they are still entitled to certain rights that ensure their well-being and safety.
If you want help on filing wage claims for unlawful withholding of benefits, getting legal advice from Labor Law Advocates is your best option.
We have California’s award-winning employment lawyers, who can help you navigate the complex federal employment law. Speak with one of the experts at Labor Law Advocates for a free consultation.
We are available 24/7. Call us anytime at (424)-688-3632.