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.
Exempt Salaried Employee vs. Non-Exempt Hourly Employee
The difference between an exempt employee and non-exempt employee is that exempt employees are not subject to state and federal labor laws, including for overtime, rest breaks, and meal breaks. In order to be considered an exempt employee, the employee must meet the following tests:
- Be primarily engaged in executive, administrative or professional duties (generally, this requires the employee dedicate about 50% or more of work time to these duties);
- Regularly and customarily exercise discretion and independent judgment on the job; and
- Earn a salary equivalent to at least twice the state minimum wage for full-time work (based on a 40-hour workweek). (Lab. Code § 515.)
Through 2023, the minimum annual salary to qualify for an exempt employee was $64,480 (double the state minimum wage $15.50/hour).
Effective January 1, 2024, the minimum annual salary to qualify for an exempt employee is $66,560 (double the state minimum wage $16/hour).This number is set to increase every year.
If your salary was less than $64,480 in 2023 or is less than $66,560 per year in 2024, you are likely misclassified and are entitled to damages.