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socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 39043
Experience:  Retired (mostly)
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I live in California and for the past six years I have been

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I live in California and for the past six years I have been working as an independent contractor as a technical writer and editor. I pay no withholding (I get a 1099 form each year), no insurance, nor any other compensation, and about almost 100% of my income derives from this work. However, I am expected to participate in weekly conference calls, meetings, and occasionally out of town trips to meet with my employer's client. Recently my employer has opened an office to appear to be more of a "real" company, and my employer's clients seem to assume I am a full-time employee and not a contractor. What exact are the criteria that determine if I am a contractor or an FTE? I feel my employer is taking advantage of me. That said, I like my work and I am paid very well, and it would be difficult to get comparable compensation from other clients (which I don't have in order to always be available).

Employment Development Department form DE 38 can be used to determine whether or not a worker is an employee or independent contractor. The general rule of California law is that a worker who is subject to the right of an employer to control the manner and means by which the worker accomplishes his/her work, is an employee. Whereas an independent contractor relationship is found where the employer is only concerned with the result of the worker, and not as to how it is accomplished.

There are a number of ways to force this issue into the open. You can submit a payroll tax fraud complaint to the EDD (see link). You can submit a BOFE, re failure of employer to pay workers compensation (see link). You can file a form SS-8 with the IRS. And, you can do all of the above.

Or, you could hire an employment rights attorney and sue for failure to pay federal ERISA benefits (discrimination in health care and retirement) (see link).

Note: An employer who is found to have misclassified a worker, can be subject to huge fines -- substantial enough to put many small businesses "out of business." So, be careful what you wish for, because if the government agrees that you have been misclassified (and you probably have been, because most independent contractors are misclassified employees) -- your new "employer" could have a very short future existence.

Hope this helps.

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socrateaser and other California Employment Law Specialists are ready to help you
Customer: replied 5 years ago.
Great answer. I am basically happy with my current status, but I just wanted to know where I stand should things change. Ethics aside, could I use this as a bargaining chip? For example, I work from home and prefer to keep it that way. I don't mind attending occasional local meetings, but as I said, occasionally my employer expects me to meet with his client halfway across the country. I'm reimbursed for travel costs but he only pays me for the time spent meeting with his client. I really don't want to continue doing this. And would any of the remedies you suggested apply if I am terminated as a contractor? I'm really more concerned about the future than the status quo.
Ethics aside, could I use this as a bargaining chip?

A: Sure, but you could be arrested and charged with criminal extortion for doing so, if it can be shown that you tried to leverage your disputed employment status in exchange for an agreement to not report the employer to EDD/DLSE/IRS.

This sort of legal corecion is permitted after a lawsuit is filed, as a means of obtaining a settlement. Engaging in the same activity before filing suit can get you into considerable legal trouble.

And would any of the remedies you suggested apply if I am terminated as a contractor?

A: If you are terminated, then you can apply for unemployment and claim you are misclassified. If EDD agrees, then it will pay your UI benefits and go after the employer.

Similarly, if you make the claim to the IRS, and it agrees, then Uncle Sam will charge the employer with one half of your unpaid Social Security and Medicare tax. This will not get you a rebate on your Form 1040, but it will increase your lifetime payments into the system (and hopefully, your future benefits).

If you sue under ERISA, and your employer had a retirement plan, then you could be entitled to a proportionate benefit. You could also be entitled to a settlement based upon the failure to provide health care benefits during your "employment."

Hope this helps.
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