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Independent Contractors

California Labor Code Section 3353 defines an independent contractor as someone who renders a service to someone for a fee for a specific result. The code specifies that the hiring person only controls or directs the contractor as to the goal to be achieved, not the way the result is achieved. A classic example of an independent contractor would be an owner of a household hiring a local gardener to mow her law. The owner of the home simply asks that the task be completed, and agrees on a price for the job. Whether the gardener uses a mower, weed-wacker, clippers, or some combination thereof, is entirely up to the gardener. Whether you perform the work or request the work, there are important distinctions between an independent contractor and an employee. The Oakland independent contractor attorneys at Spencer Young Law understand the difference and can clearly explain it to you.

Historically, individuals who needed jobs done in and relating to the home, and businesses in nearly every line of work, have used independent contractors to get tasks competed without incurring the additional expense of payroll taxes, worker compensation insurance, and without providing benefits, such as sick leave and sick pay. A business could also get away with not having to provide paid rest breaks, meal break opportunities, overtime, double-time, vacation days and other benefits to a contractor.

In 2018, the California Supreme Court issued a landmark decision in a case called Dynamex Operations West, Inc. v. Superior Court of Los Angeles. In the 82-page decision, the court took the thirteen factor Borello case test for independent contractors and simplified it into a simpler three-part “ABC Test”. The court held that a person only qualifies as independent contractor if the employer proves the following:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact;
  • The worker performs work that is outside the usual course of the hiring entity’s business; and
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In September 2019, California Governor Gavin Newsom signed Assembly Bill AB (5) into law. AB (5) went into effect on January 1, 2020. AB (5) requires application of the ABC Test to determine whether a worker is an employee or independent contractor. AB(5) specifically exempts certain categories of workers from the ABC Test, and instead states that the Borello Test applies. Those categories of workers are: Certain licensed insurance agents and brokers; certain licensed physicians, surgeons, dentists, podiatrists, psychologists, or veterinarians; certain licensed attorneys, architects, engineers, private investigators and accountants; certain registered securities broker-dealers or investment advisers or their agents and representatives; certain direct salespersons; certain licensed commercial fishermen (only through December 31, 2022 unless extended by the Legislature); and certain newspaper distributors or carriers (only through December 31, 2020 unless extended by the Legislature). Consult with the Oakland independent contractor attorneys at Spencer Young Law to determine which test applies to you or your workers.

The following are some examples for California employees seeking to understand whether they have been improperly classified and/or paid as independent contractor. These examples are not a substitute for having a consultation with your local employment lawyer because every situation is fact specific.

Example 1 – Misclassification as Independent Contractor: Employee Joe was hired by a moving company in Oakland, California. When Joe was hired, he was told that he would only be called when needed. He was told to sign an “Independent Contractor Agreement” as part of his employment onboarding materials, wherein he was promised $20.00 per hour for every hour worked. Joe works for moving company for six months, often more than eight hours a day, and often on weekends. He is often not afforded the opportunity to take rest breaks. Joe and his team eat in the truck while moving client’s home goods from apartment to apartment. If Joe were to call an employment lawyer, that lawyer would likely advise Joe that he has been misclassified as an independent contractor, and that he is entitled to overtime, rest break premiums, meal break premiums, among other “damages” for misclassification.

Example 2 – Misclassification as Independent Contractor: Therapist Jane is a license Marriage and Family Therapist (MFT). Jane is excited that she finished her 3000 supervisory hours and that she can finally make a good living providing therapy for individuals and couples. Jane decides to associate with a therapy clinic in Berkeley, California. She also rents office space in downtown Oakland, CA. The clinic in Berkeley has Jane sign an “Independent Contractor Agreement” that specifies that she can charge a certain rate per session, but that forty percent of what she charges goes to the clinic. Jane is willfully engaging in independent contractor work that is likely unlawful according to AB (5). The clinic should most likely have put Jane on payroll, provided her with sick leave under Berkeley’s local sick leave and sick pay ordinance, and generally treated her like an employee, not an independent contractor. The clinic may be liable to Jane for intentional misclassification.

Example 3 – Likely Proper Classification as an Independent Contractor: Home-owner H hires Cleaner C to clean H’s home every first and third Friday of every month. C runs their own cleaning services and regularly engages in cleaning houses. H does not direct or control C in how the work gets done. C is most likely properly classified as an independent contractor.

There are limitless hypothetical examples of misclassifications of employees. If you believe you have been misclassified as an independent contractor and have unpaid overtime and other damages to consider as a result, call Spencer Young Law now to get a free consultation on your rights. There are time limitations for unpaid wage claims. Act now to protect your rights.

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