Misclassification

There are generally two ways in which an employer may misclassify an employee and therefore pay them improperly—either the employer claims the employee is an independent contractor, or that the employee is exempt from wage and hour laws.

Independent Contractor

Companies routinely misclassify employees as independent contractors. California law allows workers who are misclassified as 1099 independent contractors (but should have been treated as W2 employees) to file a wage and hour lawsuits. The proper classification of workers is important because the protections of California wage and hour law – including rules about overtime pay, minimum wage laws, and meal and rest breaks – only apply to actual employees, and not to independent contractors.

However, employers cannot get around California wage and hour laws by simply declaring that an employee is an independent contractor, or by making the employee sign an agreement stating that s/he is an independent contractor. Unless the person hired meets the legal definition of independent contractor, he or she is an employee, and must receive all the protections California employment law provides to employees

In California, the ABC Test applies.  Under the ABC Test, a worker is presumed to be an employee, unless the hiring entity can establish that:

(a) the person is free from the  control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the  work and in fact;

(b) the person performs work that is outside the usual course of the hiring entity’s business; and

(c) the person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

If an employer fails the ABC Test, damages can include:

• unpaid wages,
• unpaid overtime,
• unpaid meal and rest breaks,
• penalties and interest, and
• attorneys’ fees and costs.