Independent Contractor Misclassification
What is Independent Contractor Misclassification?
Independent contractor misclassification occurs when an employer attempts to avoid the expense of hiring an employee and hires the person as a contractor instead. Misclassified contractors are denied critical benefits and protections they are entitled to by law. As a result, workers who have been misclassified as independent contractors (but should have been a W2 employee) can file a lawsuit seeking damages. Damages include:
What Is An “Independent Contractor?”
The Labor Code defines an independent contractor as anyone who is hired to complete a specific task and retains control over how the task is completed. (Lab. Code § 3353.) If the person performing the task does not meet the definition, i.e. they do not control how the task is completed, they are presumed to be an “employee.” (Lab. Code § 3357.) As you can see, control is important.
The distinction between “employee” and “independent contractor” is important because the labor code’s wage and hour laws do not apply to independent contractors.
California Minimum Wage Requirements
$12 / hr (25 or fewer employees)
$13 / hr (26 or more employees)
$11 / hr (25 or fewer employees)
$12 / hr (26 or more employees)
$10.50 / hr (25 or fewer employees)
$11 / hr (26 or more employees)
$10 / hr (25 or fewer employees)
$10.50 / hr (26 or more employees)
What Test Do Courts Use To Determine Who Is An “Independent Contractor?”
As you may have heard, California has passed AB-5, which establishes the “ABC test” for determining whether a worker is an independent contractor or an employee. The ABC tests presume that all workers are employees. However, a worker may be classified as an independent contractor if the employer can establish all three of the following:
A – The worker is free from the control and direction of the hiring entity, both under the contract and in fact; and
B – The work must be outside the normal course of the hiring entity’s business; and
C – The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
If one of these points cannot be met, the worker is not an independent contractor, they are an employee!
Why Does The “Independent Contractor” Distinction Actually Matter?
If an employer incorrectly misclassifies an employee as an Independent Contractor, the employee loses out on several labor code protections, such as the right to:
What If I Signed an Independent Contractor Agreement?
Employers will often require misclassified independent contractors to sign some type of “independent contractor agreement.” These agreements attempt to shield the employer from their legal obligations. However, “independent contractor agreements” do not determine the employee’s legal working relationship with the company. Instead, courts tend to focus on the employer's control, among the other factors listed above, to determine the employee’s employment relationship.
What Should You Do If You Were Improperly Misclassified?
If you don’t believe that you are properly classified as an independent contractor, you should reach out to an experienced California Employment Law Attorney to discuss your unique situation. As you can tell, every situation is different and no one-sized-fit-all approach will work for every employee.