California Determining Employee or Independent Contractor Status
Statutory definitions and presumptions determine whether the relationship between a general contractor and a subcontractor is employer/employee or principal/independent contractor.
Section 621.5 defines employee in the context of the contracting business for purposes of determining unemployment insurance coverage:
"(a) 'Employee' . . . means any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who holds a valid state contractor's license pursuant to the Contractors' State License Law.
(b) When subdivision (a) does not apply, 'employee' shall also mean any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who is required to obtain a valid state contractor's license pursuant to the Contractors' State License Law." Section 13004.5 provides an identical definition of employee for purposes of determining whether taxes must be withheld from wages.
Labor Code section 2750.5 sets forth a statutory presumption as to whether a person or entity is an employee or independent contractor.
The statute provides: ". . . a rebuttable presumption affecting the burden of proof that a worker performing services for which a license is required pursuant to the Contractors' State License Law, or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor." ( Lab. Code, 2750.5, italics added.)
After stating three factors for proving independent contract status, the penultimate paragraph of the statute mandates ". . . any person performing any function or activity for which a license is required pursuant to the Contractors' State License Law shall hold a valid contractors' license as a condition of having independent contractor status." ( Lab. Code, 2750.5, italics added.)
Pursuant to the plain language of Labor Code section 2750.5, an unlicensed subcontractor may not be an independent contractor but is instead deemed a statutory employee of the general contractor. ( State Compensation Ins. Fund v. Workers' Comp. Appeals Bd. (1985) 40 Cal. 3d 5, 15 219 Cal. Rptr. 13, 706 P.2d 1146.)
Title 26 United States Code section 3305(d) provides:
"No person shall be relieved from compliance with a State unemployment compensation law on the ground that services were performed on land or premises owned, held, or possessed by the United States, and any State shall have full jurisdiction and power to enforce the provisions of such law to the same extent and with the same effect as though such place were not owned, held, or possessed by the United States."
This statute shows Congress's unequivocal deferral to state unemployment compensation laws in cases where contracting services are performed on federal land. (See West River Elec. v. Black Hills Power and Light Co. (8th Cir. 1990) 918 F.2d 713, 719.)
The plain meaning of the language contained in title 26 United States Code section 3305(d), specifically permits California to enforce its unemployment compensation laws where services were performed on federal land "to the same extent and with the same effect" as though the services had not been performed on federal land.