What’s the difference between an employee and an independent contractor?

Many of the most complex issues in employment law concern the difference between an employee and an independent contractor. The difference can have profound implications because the law offers many protections to employees that are not offered to independent contractors.

The distinction between the two classifications has become more important with the rise of the so-called gig economy, which includes work such as driving for rideshare services like Uber and Lyft.

California has struggled with its response to the complexity of the problem. In 2019, Gov. Gavin Newsom signed into law a bill that reclassified certain rideshare and delivery drivers as employees rather than independent contractors. The following year, voters approved a ballot measure that reclassified many of these workers as independent contractors. But then, a year after that, a court put that ballot measure on hold due to constitutional concerns. That case is still moving through the courts.

Meanwhile, the federal government is making moves of its own to clarify the distinction. That process, too, is still ongoing.

The main differences

Put simply, the main differences between the two job classifications are:

  • An employee is paid as part of the organization’s usual payroll and works according to the employer’s guidelines in exchange for payment and benefits
  • An independent contractor has more control over when and where they work, but does not receive benefits such as health insurance and paid time off.

It’s important for employers to classify workers correctly. A worker who is misclassified as an independent contractor when they really should be considered an employee can miss out on benefits and more. As a result, they may have a legal claim against the employer.