Misclassified Employees in California. Learn Your Legal Options.
Updated: Jun 5
Find A Labor Law Attorney for Employee Misclassification
Contract work as an independent contractor is becoming increasingly common. If you or someone you know is being classified as an independent contractor for the job you do, it is important that you understand your rights. You may be subject to severe penalties if you fall into the 1099 Misclassification category. To ensure that your rights are secured, contact an Labor Law Attorney.
Power and compensation are the two factors that determine whether you are classified as an employee or an independent contractor. Throughout their workday, independent contractors incur unreimbursed costs, and they are responsible for supplying the funds to support the equipment required to perform their job. These contractors also provide their services for a flat rate to a large number of customers. Employees are unable to function under all of these circumstances.
Employers often misclassify their workers as independent contractors in order to avoid paying them correctly. Your boss prevents the following if you are working as an independent contractor:
Providing you with overtime pay
Taking care of the taxes
Providing advantages to you
Contributing to workers' compensation
Contributing to unemployment benefits
If you believe your work status has been misclassified, contact a Labor Law Attorney for legal advice and to protect your rights.
In order to save money and increase their bottom line, many companies choose to recruit contractors rather than full-time workers. Companies pay independent workers to work on temporary assignments and provide consultancy services, but they are not considered staff. Since an individual company can work for a company for several years, the distinction between workers and contractors may become blurred. Many people are confused about the distinction between being an independent contractor and being an employee because there seems to be little difference in many situations. Employees and independent contractors often work for the same company and, in some cases, perform the same tasks.
The misclassifying staff as independent contractors when they should be employees is one of the most common mistakes employers make. Although some employers can honestly misclassify employees due to a lack of legal knowledge, others do so on purpose to escape legal responsibilities. When keeping the services of independent contractors, companies have a lot more grey areas to work with. They still have some leeway when it comes to matters of job taxes in some situations. Independent contractors and self-employed persons, on the other hand, should study their relationships carefully and bear in mind the special legal and tax issues in order to appreciate the differences.
When employees are misclassified as independent contractors, they lose access to a variety of privileges and benefits that employees are entitled to. Minimum wage, meal and rest hours, paid overtime, fines, and interest, and other related rights granted to workers are examples of this. A change of work description can have consequences for liability and taxation. If you usually work more than 40 hours a week or eight hours a day but are not paid overtime because you are considered an independent contractor, you could have a wage and hour argument.
Our prescreened Employment Lawyers can explain the legal choices and are dedicated to protecting California workers' employment law rights. We will assist you in filing a lawsuit against your employer in order to recover any unpaid wages.
What are the signs that I'm a 1099 Misclassified Employee?
There is some ambiguity in determining whether someone is an employee or an independent contractor. Some people assume that it is up to the organization that receives an individual's work to identify them; however, this is incorrect. When determining whether someone is an employee or an independent contractor, the IRS has set out specific rules to follow. Some signs that you've been misclassified as a 1099 independent contractor include:
You're behind the wheel of a corporate car or another vehicle.
When you are able to take a break, the boss or someone in charge informs you.
The corporation owns the machine you use.
You are not submitting an invoice for services rendered on a monthly or weekly basis.
Your job is overseen by another, or you are reporting to a boss.
Someone is keeping track of your progress and providing you with a work schedule to stick to.
You are expected to report to work in the uniform that you are wearing as a representative of the organization.
You're using the company's business cards and email address.
There are those at work who perform the same tasks as you, but they are known as W2 workers.
Someone can tell you when it's time to take a break.
These are some of the more common indicators that an independent contractor is being misclassified by the organization for which they are delivering services. If you believe you have been misclassified, contact a Labor Law Attorney right away because you may be facing potential legal issues as well as financial obligations.
Employees vs. Independent Contractors: What's the Difference?
A contractor is typically a person who runs his or her own company. They typically provide resources and expertise that aren't normally provided by an organization. They also set their own hours and fees, work from their own place of business or home, serve several customers or clients, decide when and how to complete assignments, have their own tools and equipment, and bear the costs associated with the job. While the client will have deadlines and requirements for the work, the contractor may decide how best to complete the task and how much time to devote to it. An independent contractor, for example, is a fashion designer who works from home, sets his or her own hours, designs items for various clients, and is paid on a project-by-project basis.
An employee, on the other hand, is a person who normally works for a single employer and over whom the corporation has a great deal of influence. They usually do work that is part of the company's daily operations. Employees work at the employer's location, work under the hours set by the employer, have regularly scheduled hours, receive training and direction from the company, are subject to company discipline, are paid an hourly wage or salary, complete tasks in the manner requested by the employer, and do not invest in the work or incur costs associated with the work. The organization also offers instruction, supervision, and instructions for the work product, as well as control over how the employee completes the work.
California Wage Orders: ABC Classification Test
Lawyers, judges, and government officials have used the Borello multi-factored classification test to decide if a worker is an employee or a contractor for years, if not decades. One of the reasons was the company's ability to monitor how the job was done as well as the means by which the employee achieved the desired results. If a driver for a gig-economy car service, for example, determined when to start work on a given day, what days to work, where to work, when to leave for the day, when and for how long to take breaks, and what to wear to work, they were almost certainly known as independent contractors.
The worker is free from the company's guidance and influence in connection with the work performed, whether by contract or in practice.
To demonstrate this section of the ABC test, the California Supreme Court offered some examples. Western Ports v. Employment Sec. Dept. involved a company that had previously misclassified its delivery drivers and was unable to demonstrate that a truck driver was free from the company's guidance and control, as required by Part A of the ABC exam. This was because the company required the driver to obtain permission before transporting passengers, to keep the truck clean, to work on tasks that were not scheduled in advance, and to terminate a driver's services for failure to contact the dispatch center, tardiness, or any other violation of the company's policy.
The employee does work that is not part of the company's normal operations.
This means that a worker is considered an independent contractor if their responsibilities are clearly the same or identical to those of workers, but the job is done outside of the business entity's normal operations. As a result, the worker is considered to have their own company and is not considered to be working with the recruiting agency.
The Court gave the following examples: When a retail store hires an outside electrician to install a new electrical line in the store's premises or a plumber to fix a leak in a toilet, the electrician's or plumber's services are not part of the store's normal course of business. As a result, the electrician or plumber may not have been disciplined or allowed to work at the store as an employee.
Staff, on the other hand, are called employees in the following situations:
When a bakery employs cake decorators on a regular basis to work on custom-designed cakes
When a museum that offers classes hires an art teacher to teach art classes on a daily and ongoing basis
When a clothing manufacturing corporation hires a committed, work-at-home seamstress to make clothes using the entity's designs and materials, which will be marketed and sold by the entity
When a resort that offers entertainment hires a performer on a regular basis.
When a business that harvests trees and sells cut timber hires a worker to cut and harvest trees, it's called "forest harvesting."
All of these cases have one thing in common: employees are employed to do work that is part of the company's normal business operations. As a result, it would be fair to regard them as workers under the (B) portion of the ABC test. The worker is normally working in a similar sector, occupation, or trade that he or she has started on their own.
When determining whether a worker is an independent contractor, it isn't enough for the recruiting entity to allow the worker to work for other clients or run his or her own company. Instead, courts will consider whether the company is marketed, whether it is registered or incorporated, and whether it provides services to the general public and other potential clients. The ABC test allows the recruiting entity to demonstrate that a worker who decided to start a company for himself or herself followed the standard procedures for establishing and marketing an independent business. If the hiring body marks the worker as an independent contractor arbitrarily, the worker should be treated as an employee because he or she is not engaged in an independently defined trade. Furthermore, the fact that the recruiting entity did not discourage or forbid the worker from participating in independent trade is insufficient evidence that the worker chose to go into business for himself or herself.
When classifying staff, care must be taken to ensure that they meet all of the A, B, and C criteria. If a recruiting agency fails to create any of these three sections of the ABC test, the worker would be classified as an employee for the purposes of the California Wage Orders rather than an independent contractor. These measures will also be used by the California Department of Labor Standards Enforcement (DLSE) to decide whether a worker is covered by the wage orders.
Independent contractors are now protected from abuse by recruiting firms as a result of the Court's decision and are in a stronger position to ensure that their interests are addressed and met while doing business with such companies. When an employee works for a company, the legislation ensures a certain level of flexibility in terms of benefits, holidays, and pay scale.
Employees in California are entitled to certain rights and benefits.
Under state and federal law, California employees are entitled to a wide variety of protections. Some of the laws that apply to workers but not contractors are as follows:
Employees are covered by anti-discrimination laws on both a state and federal level.
Unemployment insurance plans are available to employees.
Wage and hour protections, such as paid overtime, minimum wage, and meal or rest breaks, are all guaranteed to employees.
Employers are required to provide workers' compensation benefits to their employees.
Employers are required to deduct federal and state income taxes from their workers' paychecks.
Independent Contractors' Rights and Responsibilities
The "hiring" agency is called a client, not an employer when it comes to independent contractors. Independent contractors have full control of how, where, and where a project is done. The organization that hires a contractor does not have the authority to guide and manage the job. The customer decides the desired result of the job, but the independent contractor has complete control over how it is accomplished.
Although the client does not have direct control or direction over the job, the independent contractor does not have complete control over all aspects of the partnership. Independent contractors are required to finish the project according to the terms of their contract as soon as possible. Furthermore, since the "hiring" firms are not allowed to withhold taxes, independent contractors must pay their taxes.
As an independent contractor, you are responsible for the following:
If no one is paying into the unemployment fund on your behalf, you will be ineligible for unemployment insurance.
If no one is paying into the worker's compensation fund on your behalf, you will be ineligible for worker's compensation.
Making sure you've paid enough of your Social Security and Medicare contributions. Your employer would be responsible for half of the cost if you were an employee; but, if you are an independent contractor, you are responsible for the entire cost.
You are solely responsible for your own healthcare coverage.
Employees are not eligible for any job benefits such as sick pay, rest breaks, overtime pay, or minimum wage insurance.
If you believe your job qualifi