Employee vs. Contractor

Employee vs. Contractor

I get a lot of calls regarding lay employment issues, and one of my primary roles in relation to congregations is to be a resource in this area. I am able to respond to most issues and I have access to a number of internal and external resources that I can tap to answer the more technical questions of law.

Regardless of what you do with the information it is important that you make educated decisions in relation to how you manage your employees. Exposure in this area is significant and employers don’t get leniency for ignorance when employees take them to court.

Two of the most common questions I am asked are 1) whether an employee qualifies as exempt (salaried) vs. nonexempt (hourly); and 2) whether a worker qualifies as an outside contractor vs. employee. These decisions are not to be taken lightly as the out of pocket costs can be high if someone is later determined to have been misclassified.

Exempt vs. Nonexempt

Employers often misclassify employees as exempt for convenience. Hours don’t need to be tracked and monthly costs are more predictable. Employers do not pay overtime to salaried (exempt) employees. Employees prefer not having to complete a time card. However, these are not appropriate reasons for noncompliance with California Labor Code.

Guidelines for making this determination are available on the Division of Industrial Relations website and are spelled out in the context of wage orders which specify wages, hours and working conditions for employees. The first two pages of Wage Order 4-2001 specify which employees may be exempted from the Order. A copy of this Wage Order can be found listed under “Documents and Forms” on the Human Resources section of our website by clicking:


One factor that will often yield a quick decision is that the employee must receive an annual salary of at least two times the minimum wage times 2080 hours - $33,280/year. This amount cannot be prorated when the employee is part-time. Because the employee is exempt, it doesn’t matter how many hours s/he works. This is a statutory threshold, and if it is not met, the employee cannot be classified as exempt. (1)

Outside Contractor vs. Employee

Exposure related to misclassification of a worker as an outside contractor includes injury on the job; access to disability insurance and health benefits; paid rest breaks; employment taxes, etc.

By clicking here you will find an excerpt taken from the Employment Development Department website that explains the reasons employers would feel compelled to classify a worker as an outside contractor. None of these reasons are worth the risk in the event the worker is injured or becomes disgruntled and files a lawsuit.

The excerpt includes factors to consider in making a determination about a worker. Additional information can be obtained from a number of websites which are also listed in the excerpt.

While it is important to be informed of the law, our guiding principles should begin with our baptismal covenant to strive for justice and peace among all people, and to respect the dignity of every human being. Please see “Workplace Values” also found under “Documents and Forms” at the link noted above.

(1) Note that for some professions this statutory threshold is higher.

by Canon for Administration and Finance Bobbi Yeo



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