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At your job, you can be classified as an employee or an independent contractor. How you are classified plays a significant role in the way you are compensated. An independent contractor is not considered a full-time employee and is therefore not entitled to the same benefits.
Employers have been able to get away with this by hiring people who are unaware of the difference between independent contractors and employees. Many people who qualify as employees have been intentionally misclassified so that the employer can benefit. Thankfully, you do have a way to fight back.
While some employers claim confusion over classification rules, many misclassification decisions are intentional and financially motivated. Common reasons employers misclassify workers include:
Employees are entitled to overtime under California law, while independent contractors are not. Misclassification allows employers to demand long hours without paying premium wages.
Employers must pay payroll taxes for employees, including Social Security, Medicare, unemployment insurance, and state disability insurance. Classifying workers as contractors shifts these costs entirely onto the worker.
Health insurance, paid sick leave, paid time off, and retirement contributions are not required for independent contractors. Misclassification allows employers to avoid offering these benefits.
California’s meal and rest break laws apply to employees, not contractors. Employers often misclassify workers to bypass break requirements and premium penalties.
Employers must carry workers’ compensation insurance for employees. Misclassifying workers allows employers to avoid coverage, even when the work is physically demanding or hazardous.
Independent contractors face more barriers when bringing wage and hour claims. Employers may misclassify workers to discourage complaints or reduce the risk of collective or representative actions.
Many employers want full control over schedules, duties, and performance while avoiding the obligations that come with an employer-employee relationship.
Generally, an independent contractor is someone who works for themselves and offers services to businesses. Most freelancers are independent contractors. As an independent contractor, you are responsible for paying your employment taxes, purchasing medical insurance, and keeping track of your income so you can report it on your taxes. Independent contractors are usually not eligible for unemployment benefits.
An employee is someone who works directly for an employer and is told what work to do, when to do it, and how to do it. Your employer has the right to dictate the details of your job and terminate your employment if you deviate from their rules. In exchange, you are entitled to numerous benefits, including:
California has passed multiple laws and regulations to prevent abuse and ensure workers are properly classified.
Assembly Bill 5, effective January 1, 2020, expanded employee protections by narrowing the circumstances under which a worker can be labeled an independent contractor. AB 5 added Labor Code Section 2775, which assumes a worker is an employee unless proven otherwise. AB 5 also clarified how wage and hour laws, unemployment insurance, workers’ compensation, and other labor protections apply to California workers.
This section prohibits employers from willfully misclassifying workers as independent contractors. It imposes civil penalties ranging from $5,000 to $25,000 per violation. Employers may also face additional consequences, such as:
Under PAGA, workers may file civil penalties on behalf of themselves and other aggrieved employees when the state’s labor laws are violated. PAGA claims often include misclassification allegations and can lead to significant financial recovery.
Misclassified workers are often denied unemployment benefits. However, under the CUIC, the Employment Development Department (EDD) can audit employers and demand back payments for unemployment insurance, disability insurance, and employment training taxes. Workers may also retroactively receive benefits once their status is corrected.
Employers must carry workers’ compensation insurance for all employees. Misclassified contractors who suffer job-related injuries may be denied benefits. However, California law allows these workers to file claims and seek retroactive coverage if their classification was incorrect.
To be viewed as an employee, there needs to be an employer-employee relationship. There are several factors that courts weigh to determine whether a person is an employee or an independent contractor. The primary factor courts consider is whether the individual or company has the right to control the manner and means in which the worker performs his job. Other factors include:
There is a strong presumption that workers are employees, which means the individual or company has the heavy burden of establishing the above factors.
A big misnomer is you are an independent contractor if the individual or company tells you that you are. The fact a worker may be treated as an independent contractor is of no significance in determining employment status. Even if a worker receives an IRS Form 1099 from the individual or company, which form is usually provided to independent contractors, this does not confirm that a worker is an independent contractor.
Employee misclassification can take several distinct forms:
An employer treats a worker like an employee by setting schedules, controlling how work is performed, and providing tools or equipment, but labels the worker as an independent contractor.
Employers classify workers as “exempt” from overtime even though their job duties do not meet California’s strict exemption requirements. This commonly affects salaried workers who perform routine, non-managerial tasks but are denied overtime pay.
Some employers incorrectly label part-time or temporary workers in order to avoid providing overtime, meal and rest breaks, payroll taxes, or benefits. Employment status is based on job duties and control, not the number of hours worked.
Workers are paid in cash or “under the table” to conceal the employment relationship. This practice allows employers to evade payroll taxes, insurance obligations, and wage laws, while leaving workers unprotected and exposed to financial risk.
Employee misclassification carries serious legal and financial consequences for both workers and employers in California.
Misclassified workers often lose access to basic workplace rights, including:
California imposes strict penalties on employers who misclassify workers, including:
Employers commonly rely on contracts or job titles to justify classification decisions, even when those labels do not reflect how the work is actually performed. An employment attorney helps cut through those tactics and determine whether the classification complies with California law.
An employment law attorney in Orange County can assist by:
Because misclassification often affects multiple workers, legal representation also helps determine whether a case should proceed as a representative or collective action.
If you have been misclassified by your employer, you should reach out to our Orange County independent contractor misclassification attorneys. You could receive compensation for lost wages, overtime wages, attorney fees, benefits, and more. Compensation for your lost wages may also include interest.
There is no reason for an employer to misclassify you as an independent contractor. Contact Aegis Law Firm today and make sure you are getting paid what you are owed.