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INDEPENDENT CONTRACTOR

There is a presumption that workers are employees. While some employers claim their employees are "independent contractors" to avoid payroll tax and workers' compensation insurance, the workers' compensation law often finds otherwise.

In the leading case of S.G. Borello & Sons v. DIR (1989) 48 CA3d 341, the Supreme Court had to decide whether agricultural laborers engaged to harvest cucumbers were independent contractors. Noting that "The Act must be liberally construed to extend benefits to persons injured in their employment...." and exploring the history of the law and the public policy protecting workers, the Court opined:

"We agree that under the Act, the "control-of-work-details" test for determining whether a person rendering service to another is an "employee" or an excluded "independent contractor" must be applied with deference to the purposes of the protective legislation. The nature of the work, and the overall arrangement between the parties, must be examined to determine whether they come within the "history and fundamental purposes" of the statute."

The Borello majority opinion goes on to state: "We adopt no detailed new standards for examination of the issue." Noting that "A business entity may not avoid its statutory obligations by carving up its production process into minute steps, then asserting that it lacks "control" over the exact means by which one such step is performed by the responsible workers," the Court analyzed the facts and concluded that the cucumber harvesters were employees despite a written contract deeming them to be independent contractors. In a passionate dissenting opinion, Justice Kaufman wrote:

"This court's sua sponte grant of review and the resulting majority opinion, substantially departing from long and well established statutory and case law, constitute one of the sadder episodes in the history of this court — a wholly unnecessary and inappropriate intermeddling in the affairs of and curtailment of the liberties of California's residents."

Under Labor Code §5705, the burden of proof rests upon the employer to establish "That an injured person claiming to be an employee was an independent contractor or otherwise excluded from the protection of this division where there is proof that the injured person was at the time of his or her injury actually performing service for the alleged employer."

While not part of the workers' compensation act, Labor Code §2750.5 establishes a rebuttable presumption that a worker is an employee and what is satisfactory proof of independent contractor status. The statute concludes: " For purposes of workers' compensation law, this presumption is a supplement to the existing statutory definitions of employee and independent contractor, and is not intended to lessen the coverage of employees under Division 4 and Division 5."

See, too, Employment

Label Item Links Comments
Labor Code Definition of "Independent contractor": "any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished."

"Any person rendering service for another, other than as an independent contractor, or unless expressly excluded herein, is presumed to be an employee."
LC §3353





LC §3357
 





The burden of proving that a worker is an independent contractor falls on the employer
Regulations/Rules  
Cases S.G. Borello & Sons v. DIR (1989) 48 CA3d 341 provides a thorough analysis of the law, public policy, and method of inquiry into the facts of the case, with a strong dissenting opinion. S.G. Borello & Sons v. DIR  
Forms      
Websites DIR: Independent contractor versus employee; a number of state agencies have regulations concerning independent contractors. "Because the potential liabilities and penalties are significant if an individual is treated as an independent contractor and later found to be an employee, each working relationship should be thoroughly researched and analyzed before it is established."

Employment Development Department's reporting requirements
DIR








EDD
 
Practice Tips  This is a much-litigated area of workers' compensation law with decisions on both sides. Handling a case with this issue requires a thorough and detailed analysis of the facts, especially in relation to public policy, and the history and customs of the particular industry.    
Articles
California's Tough New Independent Contractor Law
by Robert W. Wood
Forbes   
Magazine Articles
 
Roundtable    
Miscellaneous      

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