A California independent contractor agreement outlines the terms and conditions of a contract between a client and an independent contractor. The agreement documents the details of the independent contractor, what services they will provide, and distinguishes them from an employee of the business for tax and legal purposes.
This legally binding document helps to establish a working relationship between both parties.
Independent Contractor Definition
In California, an independent contractor is separate from a regular employee, which has led the state to adopt contractor laws to prevent misclassification.
Independent contractors engage in one-off projects for a company and work as a separate entity. Typical job titles of an independent contractor include:
- Freelance writers
- Web designers
- Construction workers
- Graphic designers
Worker Classification Test
California uses the ABC test to determine whether a worker is an employee or an independent contractor. The ABC test has become part of the state’s labor code, clarifying laws regarding independent contractors, unemployment insurance, wages, and hours worked.
To determine whether someone is an independent contractor, the following conditions must be met:
- According to actuality and contract, the individual is free from the control and directives of the organization hiring them to complete a specific job.
- Work completed by the individual is outside the course of the hiring agency’s business.
- The worker has their own business or trade, previously established as separate, yet is the same as the work they were hired to do by the hiring entity.
Since Proposition 22 was adopted, individuals performing gig-type work are no longer subjected to the ABC test.
What is AB 5?
AB 5 is a bill signed into California law in September 2019 by the Governor. It addresses employment status when a business hires a person as an independent contractor.
As part of AB 5, the ABC test must be used to determine if workers in the state of California are classed as employees or independent contractors.
Rights and Responsibilities
California independent contractors have the same rights and privileges as other workers in the state. Specifically, independent contractors have the right to:
-
- Payment for work done. All workers have the same rights to payment whether they are contractors or employees.
- Correct classification. The California Supreme Court ruled that the employer must inform the worker of whether they are an employee or a contractor and treat them accordingly.
- Legal recourse. Contractors have the right to sue employers for breach of contract, misclassification, and other contractual obligations.
State Taxes
Independent contractors pay California state taxes according to IRS guidelines. The employer does not withhold taxes. The contractor is responsible for paying their own federal and state taxes.
Labor Code section 226.8 prohibits willfully misclassifying an employee as an independent contractor, with fines between $5000 and $25,000 per violation. “Willful misclassification” is defined as voluntarily and knowingly classifying an employee as an independent contractor or classifying an independent contractor as an employee.
The rules and code sections regarding independent contractors do not apply to interns or volunteers. Those definitions are found in the Division of Labor Standards Enforcement Policies and Interpretations Manual [1] .
Filing for Unemployment
Partial unemployment may be available for some independent and self-employed workers under certain conditions.
The Employment Development Department (EDD) recommends that all unemployed workers apply to determine if they are qualified for benefits [2] .
Sample
Below, you can download a California independent contractor agreement template in PDF and Word format:
