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Employees Versus Contractors: What is the Difference According to California Law?

With the rise of the “gig economy” in recent years, an increasing number of businesses are turning to independent contractors rather than workers. While hiring independent contractors gives businesses and people more freedom, it also exposes employers to possible exploitation. Keep reading to learn how an employment law attorney can help and then contact PLBH at (800) 435-7542 for a free legal consultation.

Independent contractors vs. employees

Traditionally, most businesses hired people to handle all of the required business duties. Hiring an employee, on the other hand, is costly for a business since it must pay payroll taxes and is sometimes under pressure from competitors to give employees particular perks, such as health and dental insurance. Furthermore, employees are entitled to a minimum pay, and some employees are required to be paid overtime. Workers’ compensation insurance protects employees as well.

Businesses, on the other hand, may save a lot of money by hiring independent contractors. For example, a company can hire independent contractors only when they are needed and not have to pay for their benefits. Independent contractors were once solely utilized in specific businesses, but that has altered in recent years.

Employees should be aware that, while the independent contractor lifestyle has its advantages, firms have been known to exploit workers by designating them as independent contractors in order to avoid the additional costs associated with recruiting employees.

Independent Contractors in California: The Law

Uber and Lyft, two extremely significant and well-known firms based in California, are substantially responsible for the rise in independent freelancers. As a result, California is at the forefront of the difference between workers and independent contractors.

Governor Newsom, for example, passed Assembly Bill 5, or AB5, into law in 2019. The purpose of AB5 was to clarify the legal criteria by which courts evaluate an employer’s designation of a worker as an independent contractor. AB5 mandated the application of the “ABC test,” which evaluates, among other things,

  • Is the employee free from the employer’s supervision and guidance in terms of how they execute their allocated tasks?
  • Is the employee performing tasks that aren’t part of the employer’s normal operations?
  • Is the employee “usually engaged in an independent trade”?

They are not regarded an “employee” for the purposes of California employment law until they respond “yes” to all three questions. This means that a person would be entitled to all of an employee’s rights and perks.

Are you involved in an employment dispute in California?

If you feel your employer has incorrectly classified you as an independent contractor rather than an employee, the employer may be breaking California employment regulations. We proudly defend employees and employers across all sectors in a wide spectrum of employment lawsuits at PLBH. Call us now at (800) 435-7542 to request a free legal consultation.