A California Court of Appeal has ruled independent contractors can’t sue you for race-based termination of their contracts. But, despite media reports calling this decision a major employer victory, you still need to proceed cautiously when dealing with independent contractors. Here’s why.
Independent Contractor Sues For Race Bias
Anna Maria Sistare-Meyer, who is white, was hired to teach children’s dance and tumbling at a YMCA in a predominantly black Los Angeles neighborhood. Her contract stated she was an independent contractor and the agreement could be terminated on a week’s notice.
According to Sistare-Meyer’s attorney, problems began when two black women working for her were subjected to racial taunts by YMCA co-workers, including being called “Uncle Tomettes.” Shortly after Sistare-Meyer reported the problems to management, the YMCA terminated her contract.
Sistare-Meyer sued, claiming she was fired in order to ease the racial tensions caused by the fact that she is white. She alleged her contract termination violated the California Consti- tution’s prohibition against racial and other types of discrimination.
The YMCA asked the court to throw the case out, arguing the anti-discrimination laws do not protect independent contractors. Plus, according to the YMCA’s attorney, Sistare-Meyer was let go due to a budget shortfall.
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Public Policy Against Bias Doesn’t Cover Contractors
The Court of Appeal agreed with the YMCA. It concluded that Califor- nia’s constitutional protections only cover employees and don’t extend to independent contractors. Therefore contractors, unlike employees, can’t sue for wrongful termination based on violation of the public policy against race discrimination.
What This Case Means To You
Even though this ruling sends a pro-employer message that independent contractors don’t enjoy the same rights as employees, you still must treat your independent contractor relationships with proper care for several reasons.
First, the Supreme Court could decide to overturn this decision.
Second, if you have misclassified someone as an independent contractor and you’re sued for discrimination, you could end up with an expensive bill if it turns out the contractor is really an employee.
Third, even if you have legitimately classified a worker as an independent contractor, the person may still be able to sue you for discrimination despite the new decision. This is because the court only analyzed the narrow question of whether the California Constitution prohibits racism against independent contractors. But other laws could apply, such as the state Unruh Civil Rights Act, which forbids businesses from discriminating or refusing to buy, sell or trade on the grounds of race, sex, religion, national origin or disability.
Here are some steps you can take to avoid problems:
- Reevaluate independent contractor status. Regardless of whether this case is ultimately reviewed by the Supreme Court, now is a good time to reassess whether you are classifying workers correctly. You could face a host of tax, benefit and workers’ compensation problems if your “independent contractors” are really employees.
One common mistake is treating “contract” workers hired for relatively short-term assignments as independent contractors without properly analyzing their status. Remember that the more control you have over how someone does their work, the less likely they are truly an independent contractor. In close cases, it’s safer to treat the person as an employee.
- Document the reasons for your actions. As with regular employees, document the legitimate business reasons for terminating your relationship with an independent contractor. That will make it easier to defend yourself if you are sued.
- Use caution with contractors who apply for regular work. In a recent case, an independent contractor filed a discrimination charge after being turned down for a position as a regular full-time employee. The employer fired the contractor, allegedly in retaliation for the complaint. The appeals court said the person was entitled to sue under the anti-discrimination laws because she was acting as a job applicant, not an independent contractor.
Independent contractors may still be able to sue you for discrimination.