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Employees v. Independent Contractors: What’s the Difference?

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It may not seem like there is a huge difference between an independent contractor and a regular employee, but the biggest factors that separate the two is whether or not you get paid for overtime, receive rest breaks, and receive meal breaks.

Employees are covered by governmental regulations on things like pay and rest breaks, but independent contractors don’t have these same protections. According to 89.3 KPCC, the reason why businesses might go above and beyond to classify their workers is that they do not have to pay independent contractors for benefits, Social Security, or workers compensation.

At the beginning of May 2018, the California Supreme Court made the difference between the two more clear in the recent case Dynamex Operations West Inc. v. Superior Court. Up until now, the focus has been on how the business controlled the work performed.

Chief Justice Tani Cantil-Sakauye said a business must show a few things in order for a worker to be classified as an independent contractor:

  • The worker is free from the control and direction of the employer
  • The worker performs work that is outside the hirer’s core business
  • The worker engages in an independently established trade, occupation, or business

According to Law.com, this new standard is being called the ABC Test. Lexology reports that under this test, a worker is considered “suffered or permitted to work;” therefore, they are an employee for wage order purposes.

The IRS reports that misclassifying an employee makes the company liable for employment taxes. It can also spark a lawsuit from the employee if they feel they are being mistreated and misclassified. As an employer, it is important to differentiate between the two, so that there isn’t a misunderstanding between you and your employee.

If you feel as though you are being misclassified as an independent contractor, call PARRIS at (661) 485-2072 to start your free case consultation today.

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