Workers’ Compensation for Independent Contractors in California
If an employer-employee relationship exists (regardless of what the relationship is called), then you are not an independent contractor and you will able to pursue California workers’ compensation benefits. As an employee, your earnings are subject to income tax withholding and your earnings as an employee may be subject to FICA (social security tax and Medicare).Cl
Are Independent Contractors Entitled to Workers’ Compensation in California
Independent contractors are not entitled to workers’ compensation because they are not employees. Pursuant to the Internal Revenue Service, people such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.
However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
If you are an independent contractor, then you are self-employed. The earnings of a person who is working as an independent contractor are subject to self-employment tax. Independent contractors cannot pursue California workers’ compensation benefits claims.
You are not an independent contractor and an employee if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
How to if determine you are an employee or independent contractor
In order to figure out whether you’re an independent contractor or an employee, you will need
to look at three factors. All of them basically boil down to whether you or the business that pays you has more control.
- Who has the right to control your behavior at work? You will be considered an employee if:
- The business gives you instructions on when and where to work, what tools to use and/or where to purchase supplies and services.
- Instructions from the business are highly detailed.
- Evaluation systems measure how you do the work, rather than just measuring the results.
- The business trains you on how to do the job. It’s even more likely you’re an employee if the training is ongoing and involves procedures and methods.
- Who has the right to control financial and business aspects of your job? You will be considered an employee if:
- You don’t significantly invest in your work equipment.
- You don’t have many unreimbursed expenses.
- You don’t have the opportunity for profit or loss.
- Your services aren’t available to the market.
- The business guarantees you a regular wage for hourly, weekly, or other periodic work, even if you also get a commission. Independent contractors often charge flat fees for a job.
- What’s your relationship with the business? You will be considered an employee if:
- You have a written contract that states you’re an employee (but this alone can’t determine your status).
- You receive employee-type benefits, such as insurance, a pension plan, or vacation or sick pay. Companies generally don’t grant these benefits to independent contractors.
- You and the company expect that the relationship will continue indefinitely, rather than for a specific project or period.
- You provide services that are a key activity of the business.
Are independent contractors covered by workers’ compensation in California?
Generally, the answer is no. However, employers often improperly classify their employees as independent contractors to avoid paying payroll taxes, minimum wage or overtime, or complying with other wage and hour requirements such as providing meal periods and rest breaks, etc.
Additionally, employers do not have to cover independent contractors under Workers’ Compensation Insurance. However, because potential liabilities and penalties are significant it is important that each working relationship be thoroughly researched and analyzed before classifying an individual as an independent contractor and not an employee. Pursuant to Labor Code Section 3357, the Division of Labor Standards Enforcement presumes that a worker is an employee.
Workers’ Compensation Rights for Independent Contractors in California
Independent contractors are not eligible for workers’ compensation coverage; employers are not required by state law to purchase coverage for independent contractors.
Some employers misclassify employees as independent contractor to avoid paying payroll taxes and workers’ compensation premiums for them. Especially when a worker is injured, an employer may try to deny that the worker was an employee.
However, whether or not a worker is an employee is not controlled by what name the employer uses for the worker, but by the circumstances surrounding the employee’s work. Contact California Work Injury Law Center to ascertain whether you were properly classified as an independent contractor.
What To Do If your Claim Is Denied Because you are An Independent Contractor
If your claim is denied because you are a classified as independent contractor, contact California Work Injury Law Center to assess your case and whether you are eligible for workers’ compensation benefits as an employee.
Workers’ Compensation for Independent Contractors FAQs
Do you need workers’ compensation for independent contractors?
Employers are not required by state law to purchase coverage for independent contractors.
Are independent contractors covered by workers’ comp in California?
Generally, the answer is no. However, employers often improperly classify their employees as independent contractors to avoid paying payroll taxes, minimum wage or overtime, or complying with other wage and hour requirements such as providing meal periods and rest breaks, etc.
Additionally, employers do not have to cover independent contractors under Workers’ Compensation Insurance. However, because potential liabilities and penalties are significant it is important that each working relationship be thoroughly researched and analyzed before classifying an individual as an independent contractor and not an employee. Pursuant to Labor Code Section 3357, the Division of Labor Standards Enforcement presumes that a worker is an employee.
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