Misclassification of employees in California often occurs not as the result of some mistake or misunderstanding, but rather, by design. Employers engage in this illicit practice because they attempt to dodge paying employees critical benefits and offering them the protections they are entitled to under the law such as minimum wage, overtime pay, family and medical leave, unemployment benefits and safe workplaces.
Employees usually lack sufficient information to understand that they are in fact being exploited. There is a lot of confusion regarding who should be placed on a 1099 status or treated as an independent contractor as opposed to a full-time employee. Many people tend to believe that the decision to classify someone as a contractor or as an employee is based on the employer's discretion. This is an incorrect assumption.
When an individual is classified as a contractor, he or she takes on more of their tax burden compared to others who are classified as employees. Typically, employees pay a portion (about half) of their Social Security and Medicare taxes while their employers pick up the rest of it. Contractors, on the other hand, face the burden of the entire tax bill including federal and state income tax, which is usually withheld from employees' paychecks. The Internal Revenue Service has very specific guidelines to differentiate between who is an employee and who is a contractor.
Here Are Some of the Signs That You May Have Been Misclassified as a 1099 Contractor:
- You do not submit a monthly invoice for work done.
Full-time employees get paid, typically on a bi-weekly basis, by their employers. On the other hand, independent contractors bill the companies to which they provide their services. This type of billing is usually done on a weekly, biweekly or monthly basis, based on a verbal or written agreement between the contractor and the company. Some contractors bill hourly and others may invoice based on work done for a project. If you are getting a paycheck each month or biweekly, and are not being allowed to invoice the company for work done, that should raise a red flag regarding misclassification.
- The person whom you work for refers to himself or herself as your “boss” or “supervisor.”
Independent contractors are their own bosses. They do not “work for” or “report to” anyone. This is one of the biggest perks of being self-employed or working as an independent contractor instead of being full-time on a company's payroll. Independent contractors enjoy considerable autonomy in terms of how they use their time and to whom they offer their services. If the person to whom you provide your services refers to himself or herself as your “boss,” that should tell you that you are expected to behave like an employee as opposed to an independent contractor.
- You have a specific schedule and have a supervisor who tells you when to report to work and when to take your meal breaks.
Independent contractors are not bound by a specific schedule. In fact, contractors make their own schedules. While they may work with someone in the company or might provide the deliverables to them, they don't report to a “boss” or “supervisor.” The company also cannot tell contractors when or when not to take breaks. Once again, a contractor's schedule is his or her own. The company also cannot tell you, for example, when you can or can't take your vacation time.
- Other people in the company who perform the same job you do, are classified as W2 employees.
Often times, companies will classify individuals as contractors instead of W2 employees simply to avoid paying them crucial benefits such as sick pay, vacation time and medical benefits. If you find that others working in the company do pretty much what you do but are classified as W2 employees, then you should ask whether you may have been misclassified as an independent contractor so the company can save some money.
- The company requires you to wear a uniform or asks you to drive a company vehicle.
Contractors typically should not be required to wear uniforms bearing the company name and/or logo. This also applies to require you to drive a company vehicle while on the job. In most cases, only employees who are on the company's payroll may be required to wear company uniforms or operate company-issued vehicles. If these are some of the things you are being required to do, you may have been misclassified as a 1099 contractor.
- You are using a company-issued computer and have a company email address.
Contractors typically use their own work equipment such as laptops and cell phones. If the company issues their own computer or cell phone or if you have a company email address or business card, those may all be telltale signs that you are being misclassified as a contractor.
- You are required to attend meetings or training sessions.
One of the other signs that you should be classified as a full-time employee as opposed to a 1099 contractor is if your client requires that you attend regularly scheduled meetings or makes training sessions mandatory. When they require training, they give the impression that you need to be taught how to perform a job. When that occurs, the nature of the relationship changes. There is nothing abnormal about a contractor meeting with a client to go over the specifics of a job. However, if you are required to attend regular meetings with the rest of the company's team, there is a possibility that you have been misclassified.
- You have little control over how and when you complete your work.
Typically, independent contractors can choose how they complete the work as long as they finish the work on time and to the client's specifications. In addition, independent contractors also have the freedom to take on other clients. If the company is imposing limitations on what you can or can't do, that should raise a red flag regarding misclassification.
If you suspect you have been misclassified as a 1099 contractor, please contact our experienced Orange County employment lawyers to obtain more information about pursuing your legal rights.