Is it legal for a company to penalize an independent contractor?

UPDATED: Sep 30, 2022

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Is it legal for a company to penalize an independent contractor?

I recently had a deduction in my compensation from a company because I made some mistakes. However, the mistakes have not caused any loss in terms of money to the company. I looked online and saw that it is illegal for the company to deduct any pay. However, the company pointed out that I was an

Asked on June 16, 2016 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Two different issues here:
1) First, let's assume that you are an independent contractor. An independent contractor means you work according to a *contract*, or agreement, even if it is an oral, or unwritten, one. That means that they can't change it for work already done, though if it is oral (or a written one without a set duration or term), it can be changed at will by them, with notice to you, for upcoming work (that is, they could tell that in the future, they will pay you less; if do the work after being told that, you accepted the new arrangement).  But work already done must be paid at the then-agreed-upon rate, so they can't deduct anything for mistakes for what you've already done--though they can, as stated, reduce what they will pay you in the future. 
(The same goes for employees, by the way: you can't earn less than you were supposed to for work already done, but they can give you notice that they are reducing your pay in the future, unless you have a written contract to the contrary.)
2) No, as to whether you are an independent contractor: for a more detailed answer, go to the U.S. Dept. of Labor website, look under "independent contractor," and compare the criteria for being one to your job and how you work. In brief, if you work hours they set, at a location they set, and they can tell you how to do your job, then you are most likely an employee, not an independent contractorl To give an IT-related example: the guy from "Geek Squad" who makes an appointment to come and fix the business's computer, does the job and leaves or takes it back to his shop to fix, is an independent contractor; the IT guys who comes in day after day and sits in a cubicle at work and does whatever project, whenever, the employer wants him to do is an employee.
If you are an employee, you should be paid as an employee, get benefits as an employee, and have taxes taken out (withheld), etc. as an employee. If you feel you are actually an employee, speak to your state department of labor and file a complaint.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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