California’s unemployment compensation law requires employers to pay into the system for all employees. Independent contractors, on the other hand, are on their own. That might make it tempting to redefine some employees as independent contractors.
Don’t do so without careful guidance from your attorney!
As the following case shows, the Unemployment Compensation Code doesn’t allow much leeway if you exhibit substantial control over how the supposed independent contractors do their jobs.
Recent case: Sonic, a delivery service company, uses drivers to pick up and deliver packages. Arguing that its drivers are independent contractors, the company filed for a refund of unemployment comp payments it had made.
Sonic says drivers sign independent contractor agreements and are free to work other jobs and reject specific pick-ups and deliveries.
But the drivers said they didn’t read the agreements. Some didn’t buy workers’ compensation insurance, as required by the contracts. Most of the drivers worked only for Sonic and didn’t advertise or solicit other work.
Based on the total circumstances, the Court of Appeal of California upheld a lower court decision holding that the drivers were really employees. (Air Couriers International, et al., v. Employment Development Department, No. C050978, Court of Appeal of California, 2007)
Final note: This is a very complex area of the law. You should discuss any proposed agreements with your attorney.