What Can I Do If I Was Misclassified as an Independent Contractor?

Ruben Limonjyan | July 13, 2021 | Employment Law

If your employer misclassifies you as an independent contractor, you could suffer financial harm. You may also lose certain benefits that could negatively impact your retirement and future plans. 

Employers are required by law to classify workers correctly. Employers who intentionally misclassify an employee could be sued by the employee and face fines from the government. 

Why is the Correct Classification Important for an Employee?

Employees in California enjoy a variety of rights and protections. If you are misclassified, you lose those rights. 

Employee rights that you could lose if your employer classifies you as an independent contact include, but might not be limited to:

• Employer-provided retirement accounts
• Health insurance benefits
• Life insurance and disability insurance benefits
• Increased protection against workplace discrimination, sexual harassment, and other types of workplace harassment
• Protection from wrongful termination and other employer misconduct
• Unemployment benefits if you are laid off or fired
• Family and medical leave
• Paid breaks, overtime wages, vacation time, holiday pay, and other wage and hour benefits
• Employer contributions to Social Security and Medicare
• Workers’ compensation benefits for work-related injuries and illnesses

Employers who misclassify an employee generally do so because they want to avoid paying payroll taxes and employment benefits. 

By misclassifying an employee as an independent contractor, the employer can terminate the employee without worrying about unemployment compensation. The employer can also save money on workers’ compensation premiums because workers’ compensation does not cover independent contractors. 

What’s The Difference Between an Independent Contractor and an Employee?

Generally, employees are under the supervision and control of the employer while they are on the job. The employer tells the employee when to report to work, what to do, and how to perform tasks.

Independent contractors are not under the employer’s control. Instead, the company or individual is a “hirer” instead of an employer. The hirer enters a contract or agreement with the independent contractor to perform specific services or complete a job or project.

The independent contractor decides how to complete the work and when to complete the work. As long as the independent contractor completes the project on time and within parameters, the independent contractor has fulfilled the requirements under the contract. 

An independent contractor may have numerous clients that he is working for at the same time. The work is generally performed at the independent contractor’s office or job site. However, there are situations in which an independent contractor works on site for the hirer, such as painters, electricians, plumbers, and other trades.

Is There a Test for Deciding Whether a Person is an Employee or Independent Contractor?

The courts in California have adopted the ABC Test to help determine the employment status of an individual. 

According to the ABC Test, a person is an independent contractor if all three of the following factors are true:

• The individual is not subject to the control or direction of the hirer when deciding how work is to be performed;
• The individual does work that is not within the ordinary scope of the hirer’s business; and,
• The individual works in an independently established occupation, trade, or business of the same nature as the work the individual performs for the hirer.

A good rule of thumb when considering whether you are an employee or an independent contractor is to ask yourself a few questions:

• Can I come and go as I please?
• Do I provide my own tools and materials?
• Can I ignore the rules and procedures for doing my job?
• Can I take breaks and meals whenever I want without answering to anyone? 
• Can I set my own work schedule?

If you answered no to the above questions, you should probably be classified as an employee.

Suing a California Employer for Misclassification of Employment Status

California Labor Code §226.8 makes it illegal to misclassify an employee as an independent contractor intentionally or willfully. 

If you believe your employer has intentionally classified you as an independent contractor, you can file a wage and hour lawsuit. You could be entitled to recover compensation for damages including unpaid income, overtime, and meal and rest breaks. You may also receive interest and penalties on those amounts.

You may also be entitled to liquidated damages if the misclassification was intentional. The amount of liquidated damages is equal to twice your unpaid wages plus interest. 

In addition to facing a civil lawsuit by an employee, the employer may also be fined by the government for misclassifying employees and independent contractors. The government may impose a fine between $5,000 to $25,000 for each violation. 

Get the Facts and Weigh Your Options Now

If you are unsure what to do, you might want to speak with an employee misclassification lawyer about your case. You might have options for filing other claims or a lawsuit in federal court. Weighing your options carefully before filing any claims can help you receive the maximum compensation for damages available under federal or state law.