Yes, it does matter legally whether you are an independent contractor or an employee. It’s generally more advantageous for an employer to hire an independent contractor versus an employee. Independent contractors are not subject to many of the rules that employees are subject to.
It often can be difficult to tell whether a worker is an independent contractor or an employer. The IRS as well as case law have set forth tests to determine whether a worker is an independent contractor or an employee. Generally, the more control the employer has over the worker, the more likely it is that the worker is an employee. If the worker receives a steady paycheck, adheres to a schedule set by the employer, has permanent work, and depends on the employer for a large portion of the salary, the person is more likely to be an employee. If the worker has an irregular schedule, receives pay only for hours worked, supplies his or her own tools and equipment, and works on a temporary basis, the worker is more likely to be an independent contractor.
One of the most important reasons to determine whether a worker is an independent contractor or an employee is for tax purposes. An employee’s tax liability and an employer’s tax liability are determined by the worker’s employment status. If a worker is an employee, the employer must pay social security tax, federal and state unemployment tax, as well as workers’ compensation premiums in the event the worker gets injured. If a worker is an independent contractor, he or she is responsible for those taxes. There are a number of other differences as well, including time off, health insurance, overtime pay, unemployment compensation, and more.
If you believe that your employer improperly labeled you as an independent contractor when you are actually an employee, you should speak to an attorney. Call me, Conal Doyle, Los Angeles employment law attorney at 310-385-0567. My team can help. Call today to learn more about your legal rights or to schedule a free consultation.