8 Legal Rights of Independent Contractors in California
The gig economy is expanding. Many people are working freelance, platform-based, and task-focused jobs. Others have started their own businesses and are self-employed. Many of these work as independent contractors (also known as 1099 employees based on the related tax form number).
Independent contractor jobs allow for greater flexibility and entrepreneurial creativity. However, independent contractors typically have different legal rights than employees.
It can be complicated to determine if you are an independent contractor or an employee. The Internal Revenue Service, the U.S. Department of Labor, and the State of California have various rules and regulations for classifying independent contractors.
It is critical to understand your rights as an independent contractor and how to protect your status as one. Below are eight legal rights of independent contractors to help you get started.
1. Right to Work
Many enjoy self-employment and independent contracting work because they can be their own boss. As an independent contractor, you are the one who determines if, when, how, and where you work.
You are not at the direction of an employer who will dictate your schedule, location, or method of work performance. Unless contracted otherwise, you are entitled to work whenever and however you want.
The person or entity you choose to work with may have some say. They are, after all, hiring you to perform a service. They might provide instructions or preferences, but you still decide when and how the final service is rendered.
2. Right to Receive Payment
The reason we work is to make money and receive payment. As an independent contractor, you have the right to receive payment for your services.
A company that hires an independent contractor is not responsible for tax withholdings, benefits, or workers’ compensation coverage for the 1099 employee. The company is, however, responsible for paying the independent contractor for their services.
An independent contractor can set their rates or fees. There is no law or guidance regarding fee calculation. Generally, an independent contractor’s compensation is included in an agreement between the contractor and the hiring party.
3. Right to Contract
A contract or written agreement between the parties can help protect a 1099 employee’s rights. These agreements are critical to setting out the rights and responsibilities of each party. A contract can set forth:
- The type and scope of services,
- The fees or charges for performing the work (including late fees),
- The schedule for completing the work (including benchmark dates),
- The conditions for modifications or alterations in the services, and
- The termination conditions.
You can also specify that you are being hired as an independent contractor. Clear language identifying you as an independent contractor can be useful to prove that status later if needed.
A contract between the independent contractor and the hiring party is recommended. By having a contract, legal recourse may be available under state law.
For example, imagine a company hires you to perform a service but refuses to pay you. You can seek legal remedies in court because you have a contract with the company. Without a contract, your ability to recover may be limited.
4. Right to Manage Your Own Business
As an independent contractor, you call the shots. For most, having the right to manage the business is the main reason they want to be an independent contractor. You get to make all the business decisions. But managing a business has both pros and cons.
The pros include the right to select the clients you work with, the number of clients you take on, how you advertise, and whether you want to subcontract portions of the work. You dictate how the business operates.
The cons are that you are responsible for providing benefits, business or healthcare insurance, and payroll for subcontractors. There is no employer to provide these for you. These benefits create added costs and should be considered when starting a business.
5. Right to Work Where You Want
As an independent contractor, you can work where you want. Maybe you want to work from the comfort of your own home office or digitally from anywhere in the world.
You can unless you have an arrangement that requires you to meet in person or on-site with a client. Typically, this means you are responsible for supplying your own work equipment (laptop, desk, internet, etc.).
6. Right to Engage Other Independent Contractors
If you find that a project you are working on for a client needs expertise that you don’t have, you are allowed to hire subcontractors to provide that service.
It is always good to communicate with your client before engaging with subcontractors so the client knows that the task will be done by someone different. Additionally, it is advised to have written subcontractor agreements in place to hold them to the terms of the task.
7. Right to Correct Classification
You have the right to be properly classified as an independent contractor. The classification is what outlines your financial and legal obligations.
Independent contractors have different rights and obligations than employees. The major differences are that employees are legally entitled to overtime pay, minimum wage, social security, and other federal and state benefits.
Independent contractors are not entitled to those same benefits but reap the benefits of greater autonomy and flexibility. Additionally, independent contractors are responsible for certain state and federal self-employment tax requirements that employees are not responsible for.
8. Right to Legal Recourse
You are entitled to seek legal recourse if you believe your rights as an independent contractor have been violated.
As an independent contractor, there are fewer legal protections available than there are for employees. However, a knowledgeable employment attorney may be able to pursue legal action for certain cases like wrongful termination, breach of contract, or discrimination.
Resources for Independent Contractors
Your rights and responsibilities as an independent contractor can often be unclear. There are resources available to help you understand what your classification, rights, and responsibilities are.
Am I an Independent Contractor?
The classification of independent contractors and employees has become increasingly complex over time. California currently uses the ABC Test to determine if someone is an independent contractor. The test looks at the following factors:
- The amount of control the hiring entity has over the worker;
- If the work is outside the company’s typical business; and
- Whether the worker normally performs this type of work as an independent business.
The most important factor is the amount of control the hiring entity has over the worker. The more control the hiring party has over the worker, the more likely the worker will be found to be an employee, not an independent contractor. The presumption favors an employee status. It is up to the independent contractor to prove these elements.
Other tests might be applied depending on the circumstances involved. Additionally, in early 2024, the U.S. Department of Labor issued a new economic reality test to classify employees and independent contractors. An experienced attorney can inform you of the most current factors and how to understand your classification.
You can also file a Form SS-8 with the Internal Revenue Service (IRS) for a classification determination. Keep in mind that the IRS can take months to make this determination.
You can also review the California Department of Industrial Relations FAQ site or the U.S. Department of Labor website related to Independent Contractor Classification rules. If you need faster help in making this determination, contact a Starpoint Law employment attorney.
What Are the Tax Implications for Independent Contractors?
If you are an independent contractor, you are responsible for self-employment taxes. Generally, you must file an annual income tax return and pay estimated quarterly taxes. More tax information for independent contractors can be found at the following sites:
- State of California Franchise Tax Board; and
- Internal Revenue Service—self-employed individuals tax center.
Taxes are a major responsibility of an independent contractor. It is important to comply with required tax regulations.
Hire a Starpoint Southern California Employment Attorney
Hire a Starpoint Southern California employment attorney to determine your independent contractor status. Our employment lawyers are skilled. They can navigate related to the classification or misclassification of independent contractors.
Our firm has an in-depth understanding of the current and frequently changing state and federal regulations. As a small firm, we can take a one-on-one approach with each client. We will learn the specifics of your case and give you the information and support you need.
Our small size also allows us to ensure we respond to you as soon as possible. We understand your case may be impacting your day-to-day life and want to help alleviate related stress or uncertainty.
Contact Starpoint Law today to help with your employment matters.
Where You Can Find Our Sherman Oaks Office
Starpoint Injury Law Staff
Starpoint Law was founded on a number of core principles that allow us to help our clients and develop deep and meaningful relationships. If you have suffered injuries or facing an issue with your employer, reach out to our legal team and we can sit down for a free consultation and start the process immediately.
Rate this Post
Loading...