Do California Independent Contractors Qualify for Workers’ Compensation?
What is an independent contractor? Are they different from an employee and if so, how? What types of jobs do independent contractors do?
All of these are important questions, since the difference between an independent contractor and an employee may not be as clear as you think. However, the differences are especially important when considering worker’s compensation as a factor in any job hunt or decision.
We’ll go over those differences as well as outline what you can do if you are an independent contractor in the state of California.
Employee vs Independent Contractor
1. Laws
This is a major difference between the two since an employee is covered by federal and state laws including those applying to labor such as workers’ comp.
Independent contractor’s are NOT covered by these same laws. Therefore, they are unfortunately not covered by a company's workers’ compensation. An independent contractor must use their own insurance and cover their own medical expenses if an injury were to occur while on the job.
2. Type of work
Employees are usually classified as either salary, meaning you are paid a flat fee or hourly, meaning you are paid for the amount of hours you work during a particular pay period. These pay periods can run anywhere from every week, bi-weekly, to once a month. The amount an employee gets paid should remain the same unless specific changes are made such as a raise, promotion or bonus occurring at some point during a pay period.
Independent contractors, on the other hand, set up a contract that can be paid when the agreed upon work is done or via a similar method to employees where an hourly, daily or monthly payment system is set up. The independent contractor only gets paid upon sending an invoice to the company. That invoice can be sent upon completion of a task or by periodic amounts. It all depends on how often or for what the independent contractor wants to get paid.
3. Taxes
Employees provide any initial information to the employer such as name, address, Social Security number, tax filing status, and number of exemptions on a W-4 form. They are required to include all the money they made from an employer in a taxable year on their W-2 form.
Independent contractors provide any information needed such as ame, address, Taxpayer Identification Number, and certification about backup withholding via a W-9 form. They must report payments of more than $600 for a calendar year on their 1099 form.
Why are Independent Contractors not covered?
Even though the majority of Californians are covered by workers’ comp. through their employers, independent contractors are not afforded that same coverage.
This is because they are considered to be in business for themselves and working on a contractual basis. This nullifies any obligation an employer might have even though the work of an independent contractor can benefit a company just as much if not more than a regular employee. Likewise, because an independent contractor is not considered an employee, the employer bypasses the automatic need for workers’ compensation with at least one employee.
Unfortunately, there is a high number of independent contractor misclassifications that occur either due to a genuine mistake on the part of the employer or because they wish to curtail the responsibility of treating them like an employee, therefore avoiding potentially costly things such as workers’ compensation insurance, minimum wage, payroll taxes, and providing other employee benefits.
How does someone get classified as an independent contractor?
Luckily, California has a test in place to determine whether you are actually an independent contractor. It is known as the “ABC Test,'' and it has three parts to it.
1. The first part is whether or not the worker is free from the employer’s control and direction. If you are under direct control of a hiring entity, then you do not qualify as an independent contractor.
2. The second statute is if the worker performs work outside of the hiring entity’s usual course of business. Most employees work under the scope of the hiring entity’s business such as being a sales person or marketer, but an independent contractor can perform duties entirely separate from what the business normally does.
An example might be an artist working on a mural or painting for an office space. The business is not made of artists, in that sense, so an independent contractor was hired to make the art for the office space.
3. The third piece to the test is if a worker is customarily engaged in an independently established trade, occupation, or business in the work he or she performs meaning the worker is in business for themselves. Most employees don’t fall under this distinction since they are getting hired by an employer or company who will act as their boss in some shape or form.
For the independent contractor, that same company or employer acts more like a client rather than a boss.
Common types of independent contractors
Photographer
Website designer
Virtual assistant
Bookkeeper
Delivery jobs
Landscaper
Online writer
House cleaner
Dog walker
Tutor
Financial Planner
Transcriptionist
Life coach
Realtor
Research study participant
Graphic designer
Social media marketer
Roofer
Plumber
Carpenter
What can you do to protect yourself as an independent contractor?
Get your own insurance:
Regardless of what you may need it for, having insurance is generally a good rule to follow whether it be your own medical insurance, general liability insurance or errors and omission insurance plus many others that may apply to your specific situation. Even though you may not be covered in the same way an employee would, having insurance can come in handy if any incident were to occur. It’s always better to have it and not need to use it vs the other way around.
Contact a professional team specializing in workers’ compensation:
Even if you may not be qualified to get workers’ compensation, they know the best ways to navigate the situation for you. They can steer you in the right direction for your specific needs and show you any existing alternatives that only their professional experience has taught them.
Navigating the ins and outs of workers’ compensation can be difficult enough as it is without the added stress of potentially not qualifying for it. There is help, however. Consulting the experienced workers’ compensation specialists at Cole, Fisher, Cole, O’Keefe + Mahoney can give you the knowledge and direction needed to skillfully traverse any workers’ comp. issue you may face, independent contractor or otherwise.
Cole, Fisher, Cole, O’Keefe + Mahoney is Central California’s leading workers’ compensation and social security disability law firm. With over 30 years of successful experience, we are committed to securing maximum benefits for our clients in the Fresno, California area. Schedule a free consultation today.