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My Boss 1099s Me, Am I Really an Independent Contractor? (2018)

If your boss gives you a 1099 tax form each year, does that mean you are an independent contractor? What if you signed an independent contractor agreement? What if you submit invoices to your boss to be paid?

The answer may surprise you.

Every year millions of workers are misclassified as independent contractors, illegally denying them a slew of legal protections: minimum wage, overtime, meal breaks, rest breaks, mileage expense reimbursement, and other rights provided by state and federal labor codes. By one account, the federal government estimates that it loses $3-4 billion annually in tax income and employment tax revenues due to worker misclassification. That represents only a small fraction of the actual wages lost by the hard working employees who are victims of this common form of wage theft.

When workers are cheated out of even a small portion of their wages, it can lead to unpaid bills and sleepless nights for them. Sometimes the employers who engage in worker misclassification simply don’t know the law. All too often, however, they know exactly what they’re doing and should be punished. Fortunately, misclassification triggers a wide range of civil damages, hefty penalties, tax liability, and sometimes even criminal charges against the employer.

Below is the legal test for determining if you are misclassified as an independent contractor:

California’s Multifactor Test to Determine Classification

California courts look for 10 signs of an independent contractor relationship, as first established by the California Supreme Court in the 1989 case of S.G. Borello & Sons v. Department of Indus. Relations. The signs or “factors” must be viewed together as a whole, with no one particular factor controlling. If your answer to any of the following 10 questions is “yes”, then a judge may find that you are an employee, not an independent contractor, and you may be entitled to a hefty award of damages and penalties. Obviously, the more yeses you answer, the better your chances. It is important to note that misclassification of the employment relationship is a question of fact that must be determined either by a judge in a bench trial or by a jury in a jury trial.

Factor 1-Right to Control:

Does your employer have the right to control how you do your work? This is hands down the most important factor to be considered. Whether your employer actually exercises the right to control your work is irrelevant, rather it is whether or not your employer has the right to control the manners and means of accomplishing the work you perform (in other words, control over the details). Some amount of freedom of action does not turn you into an independent contractor so long as your employer has general supervision and control over how you do your work.

Factor 2-At Will:

Is your employment relationship at will? An employment relationship where the employer can fire you at any time for any (or no) reason suggests you are an employee rather than an independent contractor. Unless you have a contract or union agreement with your employer, you are probably an at-will employee, like almost every other employee in California.

Factor 3-Part of the Regular Business:

Is the work you do part of the regular business of your employer? If your employer is a retailer and you do sales, or if your employer is a restaurant and you do the cooking or serving, then your work is part of the regular business of the employer and you are probably an employee, not an independent contractor. If on the other hand, you just paint the outside of the restaurant, or you install and maintain the computers and internet for the retail store, then your work is incidental to the employer’s regular business and you may be an independent contractor.

Factor 4-Equipment, Tools, Place of Work:

Does your employer supply you with equipment, tools, and a place to work? If you are a painter and your employer provides the paint and brushes, or if you are a graphic designer and your employer provides you with a computer and workstation, you are probably an employee, not an independent contractor.

Factor 5-Pay by Hour or by Job:

Are you paid by the hour rather than by the job? For this, you should take a look at your paystub (or invoice). Does it show an hourly rate for you? If so, then you may be an employee, not an independent contractor.

Factor 6-Only Occupation or Business:

Is the work you do for your employee your only occupation or business? If you have other jobs, or you run your own business outside of work, then the answer is no and you may be an independent contractor, not an employee,

Factor 7-No Specialized or Professional Skill:

Can the work you do for your employer be done without a specialized or professional skill? In many cases, you need to look at whether the kind of work you do requires a certain type of certification, license or degree. If so, you may be an independent contractor.

Factor 8-Supervision:

Does the kind of work you do usually require a supervisor watching over you? True independent contractors can usually work alone without needing a supervisor to look over their shoulder. For example, web designers who make websites for businesses usually work by themselves, without supervision from their clients. If you need to be supervised, then you are probably an employee, not an independent contractor.

Factor 9-Long Period of Time:

Is the work you do meant to be performed over a long period of time? Independent contractors usually work on short-term assignments with a defined end date. If your employment has no defined end date (quitting, being fired or being laid off don’t count, of course), then you are probably an employee, not an independent contractor.

Factor 10-Belief:

Do you and your employer believe and act like you have an employer-employee relationship? If your employer issues you a W-2, puts you on their payroll, or treats you like an employee in front of customers and co-workers, then you are probably an employee, not an independent contractor.

So how did you do on the test? Keep in mind, your score is only a rough indicator of the likelihood a judge or jury will find that you are misclassified as an independent contractor. That having been said, if you answered “yes” to even one of the above questions, you should definitely consider talking with a labor lawyer or attorney. Ask for a free, confidential consultation. You could be owed thousands of dollars for illegal misclassification.

Kevin Panahi, Esq, is the author of this guest post. Kevin is a Bay Area employment attorney and author of Recovery My Wages, a Bay Area wage and hour law blog.

20 Comments

  1. V. Powers on February 7, 2018 at 9:00 pm

    I am a licensed clinical psychologist that works at a group clinic. We do have a “Letter of Understanding” that clearly states that I am to see a certain number of patients per day. I am paid on a “commission basis” only (being paid a certain percentage only after the insurance companies/ patients pay the clinic). There have been MANY verbal conversations between the owners & myself that I must give a certain length of notice to take time off, that I don’t have any (or final) say so in what patients are on my schedule, that “open slots” on my schedule where other patients might have cancelled MUST be filled with “anyone” by the front desk staff. There have been many times that due to personnel issues that are not under my control or that I am not involved in, the clinic does not get paid for services that I have provided to patients, and therefore I don’t get paid, sometimes ever (even though this is by no fault of mine). There are threats that I “am not allowed” to have a private practice & see patients on my own, even though the Board of Psychology Code of Ethics states otherwise. The clinic purchases 90% of supplies that are necessary for me to provide care to the patients. I have overheard conversations between owners & CPA’s where they are asking what the financial difference (obligation) is if we were to be made employees instead of 1099’s as we are currently. We get no benefits either. There are ~10 of us in this position.
    In addition, there are 5-6 other providers that get paid at an hourly rate (only for ACTUAL face-to-face patient time), REGARDLESS of the ACTUAL time worked. They are held to a strict daily/ weekly schedule, have no say so in how their schedule is set and are double & triple booked at the orders of the owners. They have no benefits, no paid time off, must give certain notice to be gone for scheduled time off and are required to give a 30-day notice if they want to leave the practice. They are also classified by clinic as 1099.
    There is also a huge concern over ethical compliance regarding patient care overall & at the direction of the owners.
    With all this said, what do you suggest the best way to handle this situation is?

  2. Zac on November 21, 2017 at 9:54 am

    Question. Im currently in a battle to get my last 3 months of salary paid to me by my previous employer. I finally quit because they had’nt paid.
    The problem is I was working for a friends company (we are no longer friends) and when salary was negotiated it was all through email, texts and verbal conversations and agreement…. nothing was signed (I know, really bad on my part). Also taxes were not taken out of my paychecks. I guess i’m basically and I.C. But again, nothing was signed.
    Do I have any chance of getting this money paid to me based on emails, texts, etc that discuss my employment, salary, etc.???
    Please help ;-l

    • Eugene Lee on December 13, 2017 at 10:58 pm

      Yes, because the test for whether you are an independent contractor is quite complicated and depends on more than 10 separate factors. If you were misclassified as an independent contractor, you may be entitled a hefty amount of penalties, on top of whatever break premiums and overtime you are owed. Please give us a call if you want to discuss this further, at (213) 992-3299. But no matter what, don’t be too quick to give up on your claims.

  3. james on November 20, 2017 at 5:34 pm

    how does the overtime rates work? anything over 8hrs a day is time1/2up to 12hrs then it is double time to 15 hrs a day, and anything over 40 is overtime?

    • Eugene Lee on December 13, 2017 at 10:56 pm

      There are three types of overtime in California:
      1. daily overtime – any hours worked past 8 hours in day must be paid at time and a half (if over 12 hours, double time)
      2. weekly overtime – any hours worked past 40 hours in a workweek must be paid at time and a half
      3. 7th day overtime – any hours worked on the seventh consecutive day worked in a workweek must be paid at time and a half (if over 8 hours on the 7th day, double time).

      No double or triple counting: You can’t count any overtime hour more than once under any of the above methods. You ARE entitled to be paid overtime according to the method which gives you the highest amount. As you can imagine, this can make calculating overtime actually quite tricky.

  4. Frankie L Buford Jr on November 15, 2017 at 1:29 pm

    Hi my girlfriend is a manager/receptionist for massage spa company that has contracts with a couple major hotels. She has a set schedule, told how she is to perform her job, has to submit payments from customers/clients, has to schedule that massage practitioners, has to make relation calls, is provided a work cell phone, she does work from home, is paid bi weekly, has to schedule time off, has no end date to her job, required to come to manager meetings, and never signed an independent contractors agreement, yet is classified as an I.C. And doesn’t have taxes taken out. She currently is being threatened that she will be fired/services no longer required because she has to go to court in 2 weeks for her child custody case. What can she do. Is this legal?

    • Eugene Lee on November 16, 2017 at 10:11 pm

      Frankie, it sounds like your girlfriend is being misclassified as a 1099 independent contractor. She should be paid as a W2 employee. It is likely your girlfriend is not being properly paid for overtime, or receiving her meal breaks and rest breaks. Your girlfriend should consider filing a labor board complaint.
      As for being fired if she goes to court, that really depends on whether she is being subpoenaed to go to court. A subpoena is an order of the court and an employer cannot require an employee to contravene such a court order.
      I hope that helps.

  5. Carol on November 14, 2017 at 6:39 pm

    Can an employer use an independent contractor to do work over an employee on payroll who can do the same job?

    Also, is it legal to pay one employee as salaried, one as day rate and one as hourly?

    • Eugene Lee on November 14, 2017 at 8:21 pm

      Carol, thank you for your questions. Your questions seem simple, but they’re actually quite complicated. There isn’t anywhere near enough information in your comment to answer these questions. As you can see from my post, independent contractor analysis is driven by numerous factors, that have to be weighed all together. The first question that needs to be answered is going to be: is it legally proper to treat that employee as an independent contractor at all, particularly if they are engaging in a duty that employees of the company also do? As for paying different employees differently – salaried, daily, hourly – that all depends on whether the employees are exempt or non-exempt. The tests for exemptions are also VERY complicated. And there are many exemptions: administrative, professional, and executive, just to name a few.
      Another thing to keep in mind, employers cannot single out or target employees for different payment or treatment based on protected characteristics, like their skin color, religion, gender, sex orientation, etc. It seems your question is going in that direction too. Anyway, as I said, simple questions but actually quite complicated. I hope that helps.

  6. EO on November 6, 2017 at 3:56 pm

    I work for a company that uses only 1099 sales people to book fundraising events.
    I was going over your list and find that:
    Factor 1: We are required to enter data from our prospecting into their database, and also need to turn in post event reports. We also receive internet leads based on whether we are doing enough “work”.
    Factor 2: Several of my co-workers have been fired for “over achieving” or for “not booking enough events”
    Factor 3: We run fundraisers that bring in product. Their sister company takes that product and resells it.
    Factor 4: We have company email, business cards, and promotional materials we are to use.
    Factor 5: We get paid by the pound on product we procure. Though there are requirements for getting paid.
    Factor 6: We are not allowed to work for another similar company (non-compete?)
    Factor 7: No professional skills needed
    Factor 8: We have a manager to report to. She constantly requires updates and extra reports.
    Factor 9: We renew our “agreement” annually
    Factor 10: We definitely receive 1099’s, but there are those in the company that do the same work and are W-2. Including our manager. They keep the W-2 employees under a separate company, but they still book the events under the same one as the 1099’s.

    Is there a chance that we have been misclassified? Can we submit a wage complaint as a group?

    • Eugene Lee on November 7, 2017 at 4:36 pm

      Hi and thank you for your comment. Based on your answers to the factors, I’d say there is a very strong likelihood you have all been misclassified. As for whether and how to file, please give us a call at (213) 992-3299 as this requires a lot more information (e.g., how many of are there, how many employees does the company have, do you all have the same/similar misclassification issues, how long have you been working there, etc.). We’d be happy to discuss this with you.

      • EO on November 8, 2017 at 3:10 pm

        Thank you for the reply. I will gather up some documents and give the office a call. In these cases where the employees are misclassified, does that mean our “independent contractor agreements” are also void? I am trying to figure out if i can change jobs and if the non-compete clause would prevent me from that.

        • Eugene Lee on November 8, 2017 at 3:52 pm

          Noncompete clauses are 99% unenforceable in the State of California. But a lawyer would need to review the contract to give you a definitive answer. Please have the contract ready when you call and we’ll take a look for you.

  7. Deanna on September 25, 2017 at 11:35 am

    I am a personal assistant and have regular duties: grocery shopping, picking up mail at P.O. Box, scheduling household maintenance, laundry, organizing garage, basement, kitchen, housekeeper, online purchases. Checking in on a daily bases to see what work needs to be done, and when boss is in town I am dictated on when needed to come and go. I do daily reminders to any and all appointments, housesitting 24/7 when boss is out of town (which is when i can do things at my leisure as long as it gets done. Yet do not have taxes being taken out of my check. I work anywhere between 25-80 hours a week with no overtime. Yet receive a salary??
    Then gives me time off when it works for both of us.
    Where am I in the independent contractor versus employee???

    • Eugene Lee on October 3, 2017 at 7:26 pm

      If you don’t have other clients and if your boss has the power to set/control your work schedule, then you probably have a strong argument that you’re an employee, not an independent contractor. It’s a complicate test, however. You’d be best off running your situation by a qualified California employment lawyer.

  8. Emily on September 14, 2017 at 6:59 pm

    I am considered an independent contractor though I have a set schedule, report to a manager, they provide all supplies, and i have to request time off. I am a massage therapist and they pay me for my scheduled massage time, but request I get there 30 minutes early to set up and spend time after work to clean up my station. All of which is not concidered part of my massage time and is unpaid. I have concerns this is illegal because they give me a 1099 so they have an “employee” they don’t pay taxes for and are getting free labor from me. Please help!

    • Eugene Lee on October 3, 2017 at 7:57 pm

      Massage therapists are very often misclassified as independent contractors. Misclassification is a way for the massage parlors to pay therapists less than is required by California labor laws. You should consider filing a labor board complaint.

  9. R. Bueno on June 8, 2017 at 1:14 pm

    How do report a company that is violating these rules?

    • Eugene Lee on June 8, 2017 at 5:50 pm

      I recommend you file a wage violation complaint with the California labor board.

      • KathybOConnell on August 25, 2017 at 7:15 pm

        If I am sole proprietor of my own only me working company and some business hire me as a IC to do their work…ie: housekeeping at their rentals…and doesn’t have me fill out a W-9 at hire date but waits until after regular b monthly pay period to tell me to sign one then has no check for me…as I’ve worked since 7\30 and have not as of this date been pad…can I Sue?
        Or do. Have to hire an attorney?
        Are their ProBono laborlaw attorneys???
        K.O

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