Can Worker Lacking Work Permit Be Hired as Independent Contractor?

An applicant recently moved here from another country and has applied for a work permit, but she has not yet received an employment authorization document from the government. She says that she was told she could work as an independent contractor, so she set up a business, with a license, insurance and a tax ID number. Are we able to hire her as an independent contractor?

This question raises several issues.

Independent Contractor

ABC Test

The starting point of the analysis would be whether the individual would pass California’s ABC test — or meet one of the exceptions to the ABC test — to be an independent contractor.

For argument’s sake, we’ll assume that because she has established a separate business entity she may fit into the “business-to-business” exception to the ABC test.

Borello

Even if an exception to the ABC test applies, the worker still must satisfy the Borello test to determine if they can be treated as an independent contractor. This test weighs several factors of the relationship between the contracting business and the individual, including but not limited to:

• The level of control the contracting business exercises over the individual’s work.
• The individual performs services directly to the business instead of the business’s customers.
• The individual holds themselves out to the public to provide similar services to other contracting businesses.
• The individual maintains the required business license and registration for the services, as well as a separate business location from the contracting business.
• The individual provides their own tools, vehicles and equipment and can negotiate rates and set their own hours consistent with the nature of the work.

Work Authorization

If we assume that she can pass the Borello test, we must look at the key issue of whether her lack of an employment authorization document affects the company’s ability to hire her as an independent contractor.

According to the U.S. Citizenship and Immigration Services (USCIS), although employers are not required to obtain a work authorization document from an independent contractor, “federal law prohibits individuals or businesses from contracting with an independent contractor knowing that the independent contractor is not authorized to work in the U.S.” (U.S. Code, Title 8, Section 1324a).

Because this individual admitted to you that she is not authorized to work in the United States, you cannot utilize her services as an independent contractor, even if she passes all the normal tests to be treated as an independent contractor.

As a result, until she receives an employment authorization document from the federal government, you cannot allow this individual to perform services for your company.

Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred members and above. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.