‘Independent Contractor’ May Legally Be an Employee

Question: I’m an independent sales representative on a month-to-month contract. I’ve been with one manufacturer for 10 1/2 years and they just had a change in management and decided not to use my services any more. I’m just wondering, because of the duration of the relationship, whether it is worthwhile to pursue some kind of settlement.

--J.B., Fullerton

Answer: While sometimes the courts will recognize an implied contract for employment that is terminated for cause based upon, among other things, length of service, that principle typically applies only to employees and not to independent contractors. As an independent contractor there really is not much you can do, provided that the manufacturer followed the termination procedure outlined in your contract.

There may be some question whether you were actually an independent contractor, however. If the manufacturer closely supervised your work, required you to work specific hours, withheld payroll taxes from you or covered you under its health plan and workers’ compensation insurance, a court might consider you to be an employee with certain implied contract rights. If you believe there is a realistic possibility that you might have qualified as an employee, you should probably consult a lawyer to examine the issue more closely.

--James J. McDonald Jr., attorney, Fisher & Phillips, instructor, UC Irvine

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Question: I work for a company that offers no health benefits. Am I still covered for an on-the-job injury?

--C.J., Huntington Beach

Answer: Almost every employee in California is protected by workers’ compensation, though there are a few exceptions. Individuals in business for themselves and unpaid volunteers may not be covered. Also, federal employees, railroad and maritime workers are covered by similar laws.

Workers’ compensation is a job-related insurance program in which the premium is paid on behalf of employees by their employer and supervised by the state. If an employee is unable to work because of a job-related injury or illness, workers’ compensation automatically pays the medical bills and provides a proportion of the injured employee’s wage until he or she is able to return to work.

Workers’ compensation is often confused with State Disability Insurance. Though very similar, workers’ compensation insurance covers “on-the-job” injuries or sickness and is paid for by the employer. However, SDI covers “off-the-job” injuries or sicknesses and is funded by an employee’s deductions from his or her paycheck. SDI will then provide a proportion of the injured employee’s wage until he or she is no longer disabled or the benefits are exhausted.

--Elizabeth Winfree-Lydon, Senior staff consultant, The Employers Group

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Question: I work for the U.S. Postal Service. Several years ago we brought in a program called E.I.: Employee Involvement. However, non-union employees are not allowed to take part--we can’t vote or anything else. Only union employees can participate. Is this a fair labor practice?

--G.W., San Clemente

Answer: There is no legal requirement that an employer impose any employee involvement program. Union employees are under a contract and often have many rights and privileges not provided to non-union employees. Excluding non-union employees may be unfair and may even harm the morale in the work force, but it is not illegal.

As a practical solution, you might join with the other non-union employees and make clear to your employer that relations in the workplace could be improved if you were allowed to participate.

Also, consider participating informally by giving management a memo with the results of an unofficial “vote” by non-union employees on a particular issue being considered by the union employees. The employer may see the mutual benefit of full participation.

--Don D. Sessions, employee rights attorney, Mission Viejo

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Question: Our business is in the process of being sold. There is a rumor that our present owners intend to declare bankruptcy after the sale has been completed. All eight of the employees here have accrued vacation time that our present company owes us. Is there a possibility that we will not be paid for this time due us if the bankruptcy rumor becomes a reality? If so, do we have any legal recourse to recoup the time off or money owed?

--M.S., Cypress

Answer: The answer to both questions is “yes.” Like other forms of compensation, vacation pay is a debt that can be discharged in and does not survive a bankruptcy. However, there may be two ways to recoup some or all of the accrued vacation pay.

First, in a bankruptcy, people holding wage claims--including vacation pay claims--do have priority (for amounts up to $2,000) over general creditors. Therefore, there may be enough money in the bankrupt estate to satisfy your claims, and you need to be sure to assert our claims in any bankruptcy proceeding.

Second, under certain circumstances, the purchaser may expressly agree or imply to agree to assume the company’s vacation pay obligation. If there is a purchase of your employer’s business and the issue of your vacation pay is not clarified for you, you should correspond immediately with the purchaser to learn the status of your pay as far as the purchaser is concerned.

--Michael A. Hood, employment law attorney, Paul, Hastings, Janofsky & Walker