One of the most important terms in California employment law is "independent contractor." Many laws that require employers to provide certain benefits frequently contain exceptions for workers who are "independent contractors." Hence, many businesses try to classify their workers as independent contractors to avoid the cost of mandatory benefits. Two of the most important benefits that can be avoided by calling a worker an independent contractor are workers' compensation coverage and mandatory overtime pay. Many Stockton businessmen operate on the mistaken assumption that they can avoid providing benefits by simply labelling an employee or group of employees as independent contractors. In April, the California Supreme Court issued an opinion that provides a clear definition of independent contractor, and the effects of this ruling are now hitting the marketplace.
The lawsuit that led to the ruling involved a messenger service that provided courier services for the Los Angeles Superior Court. In 2004, the company reclassified its drivers as independent contractors. The drivers were allowed to set their own schedules, but they were required to wear the employer's uniform. The Supreme Court prescribed a three-part test for determining whether a worker is an independent contractor: the worker must be free from control and direction from the hiring business; the worker must perform work that is outside of the hiring business' usual business; and the worker must operate an independent business involving the same nature of work.
Pro-labor groups praised the ruling as ending the practice of employers ignoring mandatory laws, such as workers' compensation coverage. When employers fail to comply with such laws, injured employees have no benefits and often end upon on public assistance. Hair stylists, for example, have been affected by the ruling because many salons rent a station to a stylist and call the stylist an independent contractor. In fact, many salons have discovered that their stylists are employees, not independent contractors.
Anyone who is curious about their status as an independent contractor may wish to consult an attorney who is experienced in workers' compensation law. A knowledgeable lawyer can provide advice on the effect of the new law and whether it has a material effect on an employer's obligation to provide important benefits.