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Rand L. Stephens & Richard Koss

Employer Liability for Independent Contractor: 1099

Close-up of the hand of a creative young man during freelance work

We’ve seen a recent fight in California over the definition of “independent contractor.” In the new gig economy world, companies like Uber and Lyft offer flexible work opportunities but seek to keep those workers defined as independent contractors, even when they work near full-time for one employer. With the passage of Proposition 22 in November, rideshare drivers and other gig economy employers can continue to define workers as independent contractors rather than employees. For those companies and for other employers who retain independent contractors (“1099 workers”), what are the rights of those workers, and what liability do employers face? Continue reading for a discussion of employer liability for independent contractors in California, and reach out to a seasoned California employment lawyer to answer any questions or for help with an employment-related matter.

What Rights Do Independent Contractors Have?

To be clear: “1099 workers” are not employees. 1099 is a tax form for independent contractors, and independent contracts are not employees. If you’ve heard the phrase “1099 employee,” it is an oxymoron–there are no 1099 employees. Independent contractors do not have many of the rights guaranteed to employees under federal and California state laws.

Contractors do not, for example, have the right to workers’ compensation protection. They do not have rights to paid healthcare, paid family leave, minimum wage, overtime pay, retirement benefits, meal and rest breaks, and many other rights. Independent contractors do have other more general rights, however. While they might not be protected by employment law, they are protected by contract law–including the covenants of good faith and fair dealing and remedies for breach of contract. Moreover, California’s Unruh Civil Rights Act prohibits discrimination and harassment in business relationships. If an independent contractor is experiencing racial or gender discrimination by a person retaining their services, they might be able to file claims under the Unruh Act or federal antidiscrimination laws relating to contracts even if they cannot file claims as a discriminated-against employee under Title VII or the California Fair Employment and Housing Act.

Misclassification as an Independent Contractor

Workers who are misclassified as independent contractors when they should be considered employees can bring claims against employers for rights they should have been guaranteed. An independent contractor under California law is a person who performs a specific service, is paid for a specific result, and retains control of how that service is performed. If the person does not meet that formal definition, such as if the person receiving the services retains control over how the service is performed, then the worker should be classified as an employee. An employer cannot get around liability for worker rights by simply declaring someone is an independent contractor when they are actually an employee.

Workers who are misclassified as independent contractors may be able to bring claims for unpaid wages, unpaid overtime, unpaid meal and rest breaks, as well as additional penalties, damages, and interest for benefits they were denied. Willful misclassification of an individual as an independent contractor carries stiff statutory penalties that go beyond the actual economic harm caused. Employers, be wary of such misclassifications in order to avoid significant economic hardship.

If you are a San Francisco employee or employer in need of advice or representation concerning retaliation, whistleblower protections, workplace discrimination, or other California labor law issues, contact the Richard Koss Bay Area employment law attorneys at 650-722-7046 on the San Francisco Peninsula, or 925-757-1700 in the East Bay.

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