Employee vs. Independent Contractor (IC) – It Matters to You
Knowing whether an individual is an employee or an independent contractor (or subcontractor) is important. It ensures you have the correct coverage to protect your business.
Employment status affects your premium too. How much you pay for workers’ compensation depends largely on how much employee payroll you have. ICs are not covered under workers’ compensation so we don’t include their payroll in the price of your policy. Correctly identifying the status of each individual working at your company can help you avoid unexpected insurance bills later.
Determining Employment Status
California Labor Code defines “Employee” and dictates how to assess whether an individual is an employee or an IC. As of July 1, 2020, per Assembly Bill 5 (“AB 5”), a new test called the “ABC test” applies (excluding specific conditional exemptions) when determining employment status for workers’ compensation purposes.
Tips and Tools to Help
Because employment status matters so much, we created resources to use as you ponder the “employee vs. IC” question. Follow the links on the left for insights on each topic, including helpful tips and tools.
We've also developed a presentation to give you a better understanding of the changes and how to determine employee status in California. We discuss what impact it might have on you, your business, or your client's business, and most importantly, what you can do now to prepare for the changes taking effect on July 1, 2020 as it relates to your workers' compensation coverage.
View “Who Is an Employee?”
*This presentation is best viewed using Chrome.
Preventing Sticker Shock
We count on information you provide during quoting about how many employees you have (i.e. employment status) and their payroll to accurately price your policy up front. When your policy ends, we verify the information you provided at quoting and throughout your policy, against your records (and other sources) to confirm our quote was on target. We then adjust your final bill to reflect any variances.
If an employment status change occurs (either at renewal or during your current policy) please let us know immediately by telling your broker or contacting your underwriter. We’ll adjust your remaining bills to reflect the accurate payroll. This will help you better manage any resulting price increase, save you from getting an unexpectedly large final bill, and keep your planned business finances on track.
Information contained on this site is intended for informational purposes only. This document is not legal, accounting or professional advice from State Fund or its employees. Please consult your own attorney with any questions you have regarding how to apply the laws and regulations outlined in this document to any specific situation.