Who is an employee? Who is an independent contractor? I’ve seen church musicians, janitors, Sunday school teachers, child care workers, youth workers, and even pastors classified one way in one church and the other way in another church. Who is right? Does it matter?
In California, the question of who is an employee and who is an independent contractor is sometimes a gray area. The Employment Development Department provides an Employment Determination Guide that helps employers determine how they should classify those who are doing work for an organization. Even still, there are times when you can reach the end of the guide and feel it could be either way. In their FAQs , the Employment Development Department admits there is no set definition of the term “independent contractor and states we must rely on the interpretations of the court and enforcement agencies. When I have contacted the Employment Development Department with questions about a particular situation for a client, I’ve always been advised on erroring on the side of determining the person is an employee. The emphasis in the Labor Code (Section 3357) is protecting the rights of employees and the EDD will always lean towards interpreting that the person is an employee.
At the end of April 2018, the California Supreme Court issued a landmark decision in a case (Dynamex Operations West, Inc. v. Superior Court of California) that gives new clarification on who can be independent contractor. According to the California Supreme Court, a worker can only be an independent contractor if they meet this three pronged test (the “ABC Test”)
(A) the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(B) the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.
It is the burden of the employer to establish that the worker is an independent contractor. This is having a major impact on many industries where various people who were contracted to do work at their discretion are no longer considered independent contractors.
What does this mean for you and your congregation? It is time to reevaluate each of your independent contractor relationships. If your musicians, youth workers, Sunday school teachers, etc. don’t meet all three of the above tests, they are employees and the church is obligated to treat them as such, providing the employer portion of Social Security and Medicare tax, ensuring they receive proper meal breaks, etc.
If you need assistance in reviewing your relationship with workers, contact us at Church Training Center for help.