Independent Contractors
This section explains the difference between an independent contractor and an employee. The courts and government agencies use many factors to determine independent contractor status. Calling someone an "independent contractor" does not make him/her an independent contractor in the legal sense. Mislabeling a worker as an independent contractor creates potential liability for both federal and California employment taxes and penalties, and liability for failure to fulfill the many legal obligations owed to an employee, such as wage and hour requirements. For your own protection, make sure that a person working as an independent contractor truly meets the numerous tests required by law.​​​​​​​

Using an accurately classified independent contractor can relieve you of the many burdens placed upon you by state and federal employment laws. For instance, independent contractors:
  • Need not be covered by workers’ compensation
  • Do not have employment taxes deducted from their earnings by an employer
  • Have no rights to employee benefits
  • Are not employees subject to the Immigration Reform and Control Act (IRCA) of 1986
  • Are not covered by many state and federal antidiscrimination laws
  • Do not subject you to vicarious liability for their acts
  • Are not included under Cal/OSHA and federal OSHA regulations in your duty to provide a safe and healthy work environment
  • Are not covered by state and federal wage and hour laws
  • Are not entitled to unemployment insurance benefits from your account
  • Are excluded from coverage under the National Labor Relations Act (NLRA) (related to unions)
  • Do not count for purposes of the WARN Act (related to plant closing)
  • On the other hand, because they are not covered by workers’ compensation, an independent contractor or his/her employee can sue you for personal injury sustained on your premises. This litigation can be far more costly than a workers’ compensation claim.