January 19, 2015
California courts and administrative agencies generally apply common law principles to determine independent contractor status. The most important factor in evaluating independent contractor status involves the independent contractor's right to control the manner and means of accomplishing the project, even if the contractor did not exercise that right with respect to all details. Factors examined for that right of control include:
(a) No Control. The company's right to control the manner and means of performance is the most important factor. When the company has a right to exercise control, it is a strong indication that the worker is an employee.
(b) Right to Discharge at Will. If the relationship is not at-will, and the worker faces potential liability for an incomplete project, there is an indication of an independent contractor relationship.
(c) Distinct Occupation or Business. A worker who has an occupation or business distinct from that of the company is more likely to be considered an independent contractor.
(d) Custom and Usage in the Industry. If it is common in the industry that the type of work being performed is usually done by an independent contractor (i.e., with no supervision by the company), there is an indication of an independent contractor relationship, though the right-to-control factor is still relevant here.
(e) Skill. The more skill a worker must possess to do the particular job, the greater the inference of independent contractor relationship.
(f) Tools and Place of Work. Usually contractors furnish their own tools. Where tools are not significant to the position, no inference is created. Independent contractors generally not required to perform work in a specific area or a fixed route.
(g) Length of Time of Service. The shorter the relationship between the company and the worker, the greater the inference that an independent contractor relationship exists
(h) Method of Payment. If a worker is paid by job rather than by time (weekly, monthly), there is a greater inference that the worker is an independent contractor.
(i) Work Part of Regular Business. If success of the business depends on the worker's services, the worker might be deemed an employee.
(j) Intent of the Parties. While not dispositive, courts will look at whether the parties intended to enter an employment relationship or an independent contractor relationship.
(k) Existence of a Contract. The lack of a contract is usually indicative of an employment relationship rather than an independent contractor relationship, but the existence of a contract will not be dispositive; rather, courts will look to the parties' relationship more than the terms of any contract.
(l) Possibility of Profit or Loss. Courts look to whether contractors face a possibility of profit or loss as a result of their services. Profit or loss implies the use of capital by the worker in an independent business; when workers are insulated from loss or are restricted in the amount of profit they can gain, they are usually employees.