Employees vs. Independent Contractors in California Employment Law

Updated: Apr 22

How Do The Categories Affect Your Labor Rights In California?

Employees and independent contractors are the two major groups of jobs in California. The way a worker is categorized for tax purposes has an effect on the IRS tax form that companies must plan. For example, if a worker is identified as an employee, their employer is normally required to provide them with a completed copy of IRS Form W-2. You can consult an Employment Lawyer in Los Angeles for any concerns regarding this complex case.

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On the other hand, independent contractors usually receive a completed copy of IRS Form 1099-MISC from the company that paid them. As a result, many people refer to independent contractors as 1099 staff and conventional employees as W-2 employees in the form of taxation.

Beyond the gaps in documentation, a worker's classification may significantly impact their legal rights. There are many legal tests that can be used to decide if an individual is an employee or an independent contractor under California law. Although the tests are similar, they are not identical. The rights or responsibilities in question will determine the required test. The following are the most critical tests:

  • The IRS's "power" test for federal income tax purposes;

  • The "ABC" exam, which is used in California law for most wage and hour issues

  • Where the ABC test does not apply, the "manner and means" test is used as a fallback under California wage and hour laws

  • The "economic realities" test, which federal courts apply

  • California's anti-discrimination laws

Despite the fact that each evaluation is slightly different, the main element in each is the degree of control the hiring team has over the employee. The greater the hiring party's influence, the more likely the worker would be classified as an employee.