California Independent Contractor Laws Broken Down

Jump to Section

Need help with a legal contract?

CREATE A FREE PROJECT POSTING
Post Project Now

Californian Independent Contractors

Independent contractors are different from traditional employees which has lead to California independent contractor laws. They engage in business activities as an independent entity and include roles such as graphic designers, freelance writers, construction workers, consultants, and more. Individuals classified as independent contractors are not employees of the hiring company.

While there are several benefits of working as an independent contractor, you are also responsible for paying your benefits, withholding Social Security taxes, and providing supplies to complete the projects you are hired to manage. Since the financial burden falls on the independent contractor, it is too easy for unlawful companies to abuse the legal system.

As such, it is vital to understand California independent contractor laws and how they may apply to your specific situation. If you need personalized legal advice, ensure that you speak with a labor lawyer for more information.

What is an Independent Contractor in California?

California’s contractor laws state that an independent contractor is a person or business who 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 you serve can only exert control over the results you are producing.

Independent Contractor vs. Employee in California

Several distinctions exist between an independent contractor vs. employee . Independent contractors and employees may perform similar tasks, but their relationships with the company are very different.

DIFFERENCE #1: Free From Managerial Control

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.

DIFFERENCE #2: Follow All Applicable Rules

While every state has its set of unique guidelines that determine an employee’s status, California’s passage of Assembly Bill 5 has specific tests that employers must perform when it comes to employee classification. AB is primarily influenced by a landslide court decision and seeks to protect workers from unsavory organizations from taking advantage of independent contractor statuses.

What is AB 5?

California Assembly Bill 5, or AB 5, is a legislative act passed by Governor Newsom in September 2019. The new law was effective on January 1, 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, Shipt, Postmates, Uber, and Lyft. Companies must utilize a three-pronged test to show whether the workers should be classified as independent contractors or employees.


Get Free Bids to Compare

Leverage our network of lawyers, request free bids, and find the right lawyer for the job.

Get Bids Now

California Independent Contractor Test

After a landmark decision, several new pieces of California legislation went into effect in January 2020. These new laws significantly impact businesses, employees, and independent contractors alike. The vast majority of rules under AB 5 and other assembly bills were designed to protect independent contractors from misclassification.

The Dynamex Decision

In 2018, the California Supreme issued a critical decision regarding the matter of Dynamex Operators West v. Superior Court of Los Angeles. The supreme court rejected a test determining whether to classify a worker as an independent contractor vs. employee known as the Borello test. Instead of the Borello test, an employee-friendly standard was adopted while ultimately upending the independent contractor market.

The most significant turn was how the supreme court incorporated a new standard that presumes all California workers are employees unless their employment meets specific criteria. The specific criteria are included in the newly accepted ABC test as a result of the Dynamex decision.

The ABC Test for Independent Contractors in California

Laws around independent contractor vs. employee relationships have mainly been ambiguous up until the Dynamex decision. While California gained the most attention over the ABC test, other states, including New Jersey and Massachusetts , have already adopted some form of it. Keep in mind that the ABC test assumes that a worker is an employee unless the test shows otherwise.

An individual is an independent contractor in California only if they meet all three (3) requirements of the test:

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

Simply put, as long as you can offer your services to other businesses, have an established entity, and provide a unique skill set, you are likely an independent contractor. Ensure that you function as one. Speak with an employment attorney to help you determine if the ABC test applies to your situation and what you can do to create a substantial independent contractor agreement that you can present to the hiring 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 (FEHA) . 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 FEHA claims, the statute also provides for reasonable attorneys’ fees reimbursement and injunctive relief. Employers violating of these employment laws can be criminally charged. These provisions also include those involving misclassified workers under California labor laws.

What To Do If You’ve Been Misclassified

If you believe that the company you are working for is misclassifying your employment, you have rights protected by state and federal laws. Your employer may be taking advantage of your relationship in favor of lower costs and higher profits. You may be owed lost work wages, overtime, benefits, and reimbursements. These financial losses will depend upon an evaluation of your case to establish the types of employment in which you are engaging.

Contractscounsel California Independent Contractors

Image via Pexels by Roberto Nickson

Here are steps you can take if your employer has misclassified you:

STEP 1: Preserve any and all communications between you and the company

STEP 2: Review the types of employment contracts in place for clarity regarding your relationships

STEP 3: Speak with an attorney to help you determine your legal options

STEP 4: File a civil claim against your employer for financial losses experienced

STEP 5: Ensure that you have an independent contractor agreement in place when engaging in future endeavors

An employee’s misclassification in California is pretty serious and complicated and could require a jury or judge trial to resolve. However, the law does entitle you to compensation for the losses you experienced as a result of their erroneous misclassification. Getting legal advice from an attorney will help you work through any Department of Labor (DOL) issues to pursue a remedy on your behalf.

When engaging with a hiring company as an independent contractor in California, it is critical to have a fully-executed independent contractor agreement active. If you need help drafting an independent contractor agreement, post your project to ContractsCounsel for free. Sign-up today!

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

ContractsCounsel verified
Attorney
7 years practicing
Free Consultation

Corporate and transactional attorney in sixth year of practice. Focus areas include general corporate counsel, labor and employment law, business partnership matters, securities matters related to privately-held companies, and regulatory compliance in securities and finance matters.

ContractsCounsel verified
Attorney
23 years practicing
Free Consultation

Forest is a general practice lawyer. He provides legal advice regarding small business law, contracts, estates and trusts, administrative law, corporate governance and compliance. Forest practiced complex commercial litigation in Florida for eight years, representing clients such as Host Marriott, Kellogg School of Business, and Toyota. Since moving to Nashville in 2005, he has provided legal advice to clients forming new businesses, planning for the future, and seeking funding through the use of equity and/or debt in their businesses. This advice has included the selection of business type, assistance in drafting and editing their business plans and offering material, reviewing proposed term sheets, and conducting due diligence. Forest is a member of the Florida, Tennessee, and Texas Bars; in addition. Forest has held a Series 7, General Securities Representative Exam, Series 24, General Securities Principal, and Series 63, Uniform Securities Agent State Law.

ContractsCounsel verified
Counsel
10 years practicing
Free Consultation

CA, NY, and FL licensed attorney with nearly a decade of experience in intellectual property, data privacy, commercial contracts, and employment. I also have both the CIPP/US and CIPP/E privacy credentials. Basically, everything your business needs!

ContractsCounsel verified
Law Firm Principal
40 years practicing
Free Consultation

David H. Charlip, the principal of Charlip Law Group, LC, is one of only 101 Board Certified Civil Trial Lawyers in Miami-Dade, with over 38 years of litigation experience. Mr. Charlip is also one of only 136 Florida Civil Law Notaries. He has managed and litigated cases across the country. Mr. Charlip has advised businesses, drafted business formation and purchase and sale documents and litigated business disputes for over 30 years and is very familiar with all aspects of contractual relations.

ContractsCounsel verified
Attorney
17 years practicing
Free Consultation

With over 16 years of experience in the area of estate planning, trademarks, copyrights and contracts, I am currently licensed in Florida and NJ. My expertise includes: counseling clients on intellectual property availability, use and registration; oversee all procedural details of registration and responses with the USPTO/US Copyright Office; negotiate, draft and review corporate contracts and licensing; counsel clients on personal protection, planning and drafting comprehensive estate plans.

ContractsCounsel verified
Attorney and Law Firm Owner/President
19 years practicing
Free Consultation

Melissa Taylor, the President and founding partner of Maurer Taylor Law, specializes in business contract review and drafting and is a second-generation attorney with private firm, in-house counsel, governmental, entrepreneurial, and solo practitioner experience. Melissa has a strong legal background, a dedication to customer service, is friendly, warm and communicative, and is particularly skilled at explaining complex legal matters in a way that's easy to understand. Melissa personally handles all client matters from start to finish to ensure client satisfaction.

ContractsCounsel verified
Attorney/Mediator/Arbitrator
40 years practicing
Free Consultation

Lawrence A. “Larry” Saichek is an AV rated attorney and a CPA focusing on business and real estate transactions, corporate law and alternative dispute resolution. With a background including five years of public accounting and six years as “in house” counsel to a national real estate investment company, Larry brings a unique perspective to his clients – as attorney, accountant and businessman. Many clients think of Larry as their outside “in house” counsel and a valued member of their team. Larry is also a Florida Supreme Court Certified Mediator and a qualified arbitrator with over 25 years of ADR experience.

ContractsCounsel verified
Attorney
32 years practicing
Free Consultation

Entertainment Attorney with 30+ years of experience, representing all aspects of the TV, Film, Music and Publishing Industries

ContractsCounsel verified
Shareholder
11 years practicing
Free Consultation

Aaron focuses his practice on startups and emerging growth companies, providing general counsel services for companies from formation through exit. Aaron frequently advises clients in connection with routine and unique legal, business, and strategic decisions, including corporate, business and technology transactions, angel and venture financings, mergers and acquisitions, protection of intellectual property, and information privacy and data security.

ContractsCounsel verified
Attorney
11 years practicing
Free Consultation

I enjoy helping businesses of all sizes succeed, from start-ups to existing small and medium sized businesses. I regularly advise corporate clients on a variety of legal issues including formation, day to day governance, reviewing and drafting business contracts and other agreements, business acquisitions and sales, as well as commercial and residential real estate issues, including sales, purchases and leases. As an attorney licensed in both Michigan and Florida, I also advise clients on real estate issues affecting businesses and individuals owning real property in either state, whether commercial, residential or vacation/investment property. I also regularly assist nonprofit organizations in obtaining and maintaining tax exempt status, and provide general legal counsel on all matters affecting public charities, private foundations and other nonprofit organizations.

ContractsCounsel verified
Healthcare Law and Employment Expert
11 years practicing
Free Consultation

Pura Rodriguez, JD, MBA is the President and Managing Partner of A Physician’s Firm, based in Miami. She represents healthcare providers from different specialties in a broad range of issues, including contract review, business planning and transactions, mergers and acquisitions, vendor and contract disputes, risk management, fraud and abuse compliance (Anti-Kickback Statute and Stark), HIPAA compliance, medical staff credentialing, employment law, and federal and state regulations. She also assists providers in planning their estates, protecting their assets, and work visa requirements.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call