Companies have a lot to lose if they misclassify employees as independent contractors. The affected workers can sue (individually or as a class) for any number of wage and hour violations. Employers can also get in trouble with the Internal Revenue Service, the Employment Development Department, the US Department of Labor, the Division of Labor Standards Enforcement, the Franchise Tax Board, and others.
So it would be nice if there was a clear test that could be applied in a straightforward manner. But there isn’t. The Employment Development Department, for example, uses a test that includes three “significant questions,” three additional questions, and seven questions that address “additional factors.”
Now, as noted by Kat Greene at Law360 (subscription required) a federal judge here in San Francisco is chiming in on the unfortunate state of the law. The Honorable Vince Chhabria of the US District Court, in addressing whether certain drivers qualify as independent contractors, issued a decision saying that the test applied by California courts “provides nothing remotely close to a clear answer.” So the issue will go to a jury that, according to Judge Chhabria, “will be handed a square peg and asked to choose between two round holes.”
Welcome to California employment law in 2015: potentially disastrous penalties for violating laws that are vague and hard to apply.
- Pay close attention to these independent contractor determinations. Recognize that different agencies use different tests.
- Get legal help if you need to.
- Consider moving your operations elsewhere. Qatar maybe. Please turn out the lights if you’re the last to leave.