On September 1, 2015, a federal judge granted class-action status to Uber drivers in a lawsuit brought against the on-demand ride company. Potentially 160,000 Uber drivers in California could join the lawsuit to argue that they were employees of the company rather than independent contractors, and thus are entitled to mileage and tip reimbursement. Using independent contractors is a model of operation not just for transportation companies, but for many industries including the legal industry. Thus, the question everyone is asking is “What determines if a worker is an employee or independent contractor in California?”
There is no statutory law or set legal definition of both statuses that decisively answers this question. However, there is a presumption in California law that a person rendering services for another is an employee. This presumption is rebuttable though, and an application of numerous factors assists in making the status determination.
In California, the most significant factor in determining whether one is an employee or an independent contractor is whether the employer/business retains the right to direct and control the manner and means in which the work is performed. Examples of an employer/business controlling the worker is if it instructs the worker on how, when and where to perform the work; if it trains and actively manages and supervises the worker; if it unilaterally determines the pay rate and method of payment. The California Supreme Court recently identified the “strongest evidence of the right to control is whether the hirer can discharge the worker without cause...” Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal. 4th 522, 531.
While the right to control remains paramount, the courts also analyze the following secondary factors in making the status determination:
Whether the worker is engaged in a distinct occupation or business (i.e. if the worker has his/her own business, that leans towards independent contractor).
Whether the work is usually done under the direction of the principal or by a specialist without supervision (i.e. if the worker is a specialist who performs services without supervision, that leans towards independent contractor).
The degree of skill required for the work (i.e. if the worker has a high degree of skill, that leans towards independent contractor).
Whether the employer or worker supplies the instrumentalities, tools, and the place of work (i.e. if the worker supplies these items, that leans towards independent contractor).
The length of time for which the services are to be performed (i.e. if the work is for a specific time period or project instead of an indefinite amount of time, that leans towards independent contractor).
The method of payment, whether by the time or by the job (i.e. if payment is by the job/project instead of an hourly basis, that leans towards independent contractor).
Whether or not the work is a part of the regular business (i.e. if the worker performs services that is not the regular part of business or the same work that is being performed by employees, that leans towards independent contractor).
Whether or not the parties believe they are creating an employer-employee relationship (i.e. if the parties executed an independent contractor agreement, that leans towards independent contractor).
Misclassification of workers as independent contractors can have costly consequences including employer liability for business-related expense reimbursements, unpaid minimum and overtime wages, unpaid payroll taxes and related penalties, and unpaid workers’ compensation insurance and other employee benefits. For more information about misclassification issues, and especially if you are unsure about whether a worker is properly classified, contact Shivani Sutaria Law Offices.