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Classification of Independent Contractors: Risk or Benefit?

For a business, classifying a person as independent contractor remains difficult under current California Law. The multi-factor test remains the standard.

This multi-factor test includes analyzing:

  • whether there's a right to control how the worker does his job;
  • whether a worker has set hours or can work whenever he or she wants;
  • whether the one performing services is engaged in a distinct occupation or business;
  • the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
  • whether the work requires a specialized skill;
  • the alleged employee's investment in equipment or materials required for his task and whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  • whether the services performed for a defined or indefinite term;
  • the method of payment, whether by the time or by the job;
  • whether or not the work is part of the regular business of the principal;
  • whether or not the parties believe they are creating the relationship of employer-employee; and
  • the alleged employee's opportunity for profit or loss.

The two class action cases filed against Uber Technologies, Inc. and Lyft, Inc., both transportation companies, involve allegations that the companies misclassified the class members as independent contractors rather than as employees. Both courts heard summary judgment motions by the class representatives and both courts ruled the issues related to classification were questions of fact not law.

Properly structuring and documenting independent contractor relationships is critically important for companies who want to continue or develop independent contractor relationships.

L. Sue Loftin is the Managing Shareholder at The Loftin Firm. For questions relating to this blog post or any other California corporate, real estate, land use, or estate planning matter, contact Ms. Loftin at (760) 814-9649. 

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Loftin | Bedell P.C.
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