Does your employer classify you as an independent contractor?
It may be surprising to learn that the misclassification of employees in California occurs more often than you might think.
The distinction between employee and independent contractor matters because employees possess many protections and benefits that independent contractors do not.
If you believe your employer misclassified your status, you may want to move forward with a suit against your employer for misclassification.
What Is an Independent Contractor v. Employee in California?
Many people do legally work as independent contractors in California. Many characteristics of independent contractors include the freedom to work for the clients they choose, setting their hours, and determining how to complete the jobs for which they contract.
However, even if an employer provides you with a 1099 and calls you an independent contractor, you may have grounds for an employee misclassification lawsuit if you are technically an employee.
Independent contractors do not enjoy the same federal and state protections in California as employees.
For example, California law entitles employees to certain rights upon termination from their job. However, California law does not provide those rights to independent contractors.
Independent contractors should have the advantage of increased freedom and control over their work. However, employee misclassification may occur if your employer limits your autonomy and asserts control over your work.
It’s crucial to assert your rights if your employer improperly classifies you as an independent contractor.
Misclassification results in the failure to receive many significant benefits. For example, California law entitles employees to the following:
- Overtime pay,
- Minimum wage,
- Unemployment compensation,
- Paid sick leave,
- Reimbursement for job-related expenses, and
- Protection from discrimination and harassment.
Misclassification claims have arisen more frequently in recent years due to the increase in the gig economy and the passing of bill AB5 in California.
How Do Workers Know If They Have Been Misclassified as Independent Contractors?
When an employer misclassifies you as an independent contractor, they effectively transfer business costs to you. Misclassified employees suffer denial of critical benefits and protections they are entitled to under California law.
Misclassification saves employers millions of dollars in unpaid overtime, expense reimbursements, meal and rest period premiums, and other expenses.
With the recent passing of employment bill AB5, classifying someone as an independent contractor became more difficult. Under the ABC test codified by AB5, a worker is an employee unless the employer proves the following:
- The worker is free from the control and direction of the company in connection with the performance of work,
- The worker performs work outside the ordinary course of the business, and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
If the party employer cannot meet all the requirements outlined by the ABC Test, California law presumes that the individual is an employee.
Additionally, there exists particular classes of workers exempt from classification under AB5. These include the following positions:
- Doctors and surgeons,
- Insurance brokers,
- Architects and engineers,
- Private investigators,
- Registered securities brokers and investment advisers, and
- Direct salespeople who sell.
If you currently hold one of those positions, the AB5 test does not determine your independent contractor status. In these circumstances, the Borello test determines independent contractor status.
The factors for the Borello test include the following:
- Whether the type of work performed is different from the type of work you were hired to complete;
- Whether the business provides the equipment required;
- The degree of financial investment made into tools and equipment;
- The skill required;
- Whether you have an opportunity to lose or gain money due to your business skills;
- Duration of employment; and
- The method by which you are paid.
If the Borello test applies to your situation, contact an employment attorney to determine whether you may sue your employer for misclassification in California. Employee misclassification lawsuits under the Borello test require careful analysis of the entirety of factors concerning your position.
What Can I Recover If I Have Been Misclassified?
If you discover your employer misclassified you as an independent contractor, California employment laws provide recourse. California employment laws allow you to bring suit against your employer for the following:
- Unpaid overtime and minimum wage,
- Compensation for denied meal and rest breaks,
- Reimbursement for business expenses,
- Unpaid unemployment insurance payments, and
- Willful misclassification of employment status.
Labor Code Section 226.8 dictates that the misclassification of employees in California as independent contractors is unlawful. Employers face penalties ranging from $5,000 to $15,000 for each violation of the statute.
Additionally, California law may impose another $10,000 to $25,000 penalty if it’s determined that the employers engaged in a willful pattern or practice of misclassification of employees in California.
If employees incurred expenses as independent contractors, they also may be entitled reimbursement. Examples include purchasing their own equipment, tools, fuel, and other similar costs that employers typically cover.
In addition, California law entitles employees to collect unpaid minimum wage and overtime compensation according to California Labor Code Section 510 and 514 and under the Fair Labor Standards Act.
Liquidated damages may also be awarded to employees equating to the amount of unpaid wages plus interest. A qualified attorney advises you to seek liquidated damages where the facts determine the employer acted in bad faith.
Deciding whether to sue your employer for misclassification requires a careful review of your case’s certain facts.
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