California Employee Misclassification Attorney

Employee misclassification occurs when a business treats a worker as something other than an employee even though the law considers that person an employee.

The two most common forms are:

Independent-Contractor Misclassification

A worker is paid as an independent contractor, often through a Form 1099, even though the worker should legally be treated as an employee.

This may allow the hiring company to avoid:

• Payroll-tax withholding
• Overtime
• Meal and rest period requirements
• Expense reimbursement
• Workers’ compensation coverage
• Unemployment insurance contributions
• Paid sick leave
• Other employee protections

Exempt-Employee Misclassification

A worker is treated as exempt from overtime and other wage protections even though the worker does not meet the legal requirements for an exemption.

This often occurs when an employer relies on a salary or job title without examining the employee’s actual duties, authority, discretion, and compensation.

For many claims under California wage orders, the Labor Code, and the Unemployment Insurance Code, a person who performs labor or services for payment is presumed to be an employee.

The hiring entity must prove all three parts of California’s ABC test to establish that the worker is an independent contractor:

A: The worker is free from the hiring entity’s control and direction, both under the contract and in actual practice.

B: The worker performs work outside the usual course of the hiring entity’s business.

C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

If the hiring entity cannot establish all three requirements, the worker is generally considered an employee for purposes governed by the test.

Free From Control and Direction

The company should not exercise the type of control normally associated with an employer.

Relevant facts may include whether the company:

• Sets the worker’s schedule
• Directs how tasks must be completed
• Requires particular methods or procedures
• Closely supervises daily work
• Requires attendance at meetings or training
• Controls where the work is performed
• Restricts the worker from accepting other clients

A worker does not automatically become an independent contractor merely because the company allows some flexibility.

Work Outside the Company’s Usual Business

The worker generally must perform services outside the hiring company’s regular course of business.

For example, a retail store that hires an outside plumber for a repair may have a stronger independent-contractor relationship than a delivery company that classifies its regular delivery drivers as contractors.

An Independently Established Business

A genuine independent contractor is ordinarily operating a business that exists separately from the particular hiring company.

Relevant facts may include whether the worker:

• Offers services to the public
• Has multiple clients
• Advertises independently
• Maintains a separate business location
• Invests in tools or equipment
• Has the ability to experience profit or loss
• Can continue operating after the relationship ends

Merely obtaining a business license or forming a limited liability company does not necessarily resolve the issue.

Yes. California law contains exceptions for certain occupations, professional relationships, referral arrangements, and business-to-business contracts.

An exception does not automatically make someone an independent contractor. It generally means that a different test, often the multifactor standard associated with the California Supreme Court’s Borello decision, may apply instead. California’s Labor Code expressly recognizes both the ABC test and circumstances in which another standard governs.

Because worker-classification rules are highly fact-specific, employees should not assume they are properly classified merely because their industry appears on an exception list.

No.

A Form 1099 reports how the company chose to treat the worker for tax purposes. A written agreement records what the parties called the relationship. Neither document overrides the law.

The actual relationship matters more than the terminology used. The IRS likewise explains that a worker is not an independent contractor merely because the parties use that label when the business retains the right to control what will be done and how it will be performed.

Possible warning signs include:

• You receive a 1099 but work a set company schedule.
• You must follow detailed company procedures.
• You perform the same work as employees on payroll.
• You work primarily or exclusively for one company.
• The company provides your tools, equipment, or workspace.
• You need permission to take time off.
• A supervisor closely controls your daily work.
• You cannot negotiate your rate or operate independently.
• Your work is central to the company’s regular business.
• The relationship is ongoing rather than project-based.

No single fact necessarily decides the issue. The full relationship must be evaluated under the correct legal standard.

Independent-contractor status is not the only classification problem.

Employers may also classify employees as exempt from overtime even though they do not satisfy a recognized exemption. Common exemptions include executive, administrative, and professional exemptions, each of which has specific compensation and duties requirements.

Receiving a salary is not enough. A job title such as “manager,” “administrator,” “coordinator,” or “supervisor” does not establish exempt status by itself. Federal guidance also states that job titles do not determine whether an employee qualifies for an overtime exemption.

Potential warning signs include:

• You are called a manager but spend most of your time performing the same work as hourly staff.
• You have little meaningful authority over hiring, discipline, or business decisions.
• You must closely follow established procedures.
• You exercise little independent judgment.
• You regularly work more than eight hours a day or 40 hours a week without overtime.
• Your salary does not satisfy applicable exemption requirements.
• Your title suggests professional work, but your duties do not require the necessary advanced knowledge or discretion.

A worker who should have been treated as an employee or as nonexempt may be entitled to compensation and other remedies.

Depending on the facts, a claim may include:

• Unpaid minimum wages
• Unpaid overtime or double time
• Compensation for off-the-clock work
• Meal or rest period premiums
• Reimbursement of necessary business expenses
• Unpaid sick leave
• Earned commissions
  Improperly withheld deductions
• Wage-statement penalties
  Waiting-time penalties
  Interest
• Statutory or civil penalties when available
• Attorney’s fees and litigation costs when authorized

The worker may also have claims involving unemployment insurance, payroll taxes, workers’ compensation, discrimination, leave, or benefits.

The U.S. Department of Labor identifies lost minimum wages, overtime, and other workplace protections as common consequences of independent-contractor misclassification.

Independent contractors ordinarily pay their own business expenses. Employees, however, may be entitled to reimbursement for necessary expenditures incurred in performing their work.

A misclassified employee may have paid for:

• Mileage
• Fuel
• Vehicle maintenance
• Cellphone service
• Internet access
• Tools
• Equipment
• Uniform-related expenses
• Supplies
• Travel
• Insurance
• Professional fees

These costs may be significant, particularly when the company required the worker to use a personal vehicle, phone, computer, or equipment as part of the job.

Businesses generally must withhold income taxes and the employee’s share of Social Security and Medicare taxes from employee wages. Employers also generally pay their corresponding share of Social Security and Medicare taxes and applicable unemployment taxes.

Independent contractors are ordinarily responsible for handling their own income and self-employment taxes. The IRS warns that a business that improperly treats an employee as an independent contractor may be liable for employment taxes.

Workers who receive a 1099 but believe they were employees may need advice from both an employment attorney and a qualified tax professional. Employment-law claims and tax-classification procedures are related but are not always resolved through the same process.

Yes. Misclassification frequently results from a companywide policy applied to workers who perform similar duties.

Examples may include:

• Drivers classified as contractors under the same agreement
• Sales representatives performing the same work
• Managers who lack genuine management authority
• Technicians required to follow identical company procedures
• Workers required to form business entities as a condition of keeping their jobs
• Employees reclassified as contractors without a meaningful change in their work

When common policies affect a group of workers, the matter may support a class action or another coordinated claim.

Helpful evidence may include:

• Independent-contractor agreements
• Offer letters
• Job descriptions
• Form 1099 records
• Pay statements and invoices
• Work schedules
• Written policies and procedures
• Emails, texts, and workplace messages
• Instructions from supervisors
• Training materials
• Time records
• Expense receipts
• Mileage logs
• Organizational charts
• Records showing the company provided tools or equipment
• Communications restricting outside work
• Evidence showing employees and contractors performed the same duties

Workers should preserve records they lawfully possess. They should not take confidential, proprietary, customer, patient, or legally restricted information they are not authorized to access.

An employer cannot lawfully punish a worker for engaging in protected wage-related activity.

Potential retaliation may include:

• Termination
• Reduced assignments or hours
• Lower pay
• Threats
• Refusal to provide future work
• Unsupported discipline
• Harassment
  Negative references
  Pressure to withdraw a complaint

A retaliation claim may exist separately from the underlying wage claim. Document any changes in treatment after asking about classification, overtime, expenses, or other compensation.

Consider taking the following steps:

• Save contracts, tax forms, pay records, invoices, and schedules.
• Document who controls your daily work and how.
• Keep records of all hours worked.
• Track overtime, missed breaks, and off-the-clock duties.
• Save receipts for necessary work expenses.
• Record whether you are permitted to work for other clients.
• Compare your duties with workers classified as employees.
• Preserve communications about your title or classification.
• Review any severance agreement or release before signing.
• Contact an employment attorney promptly because filing deadlines apply.

Worker-classification cases require careful analysis of the employee’s actual duties, the company’s business, and the legal test that applies.

The Kaufman Law Firm may assist by:

• Determining which classification standard governs
• Evaluating the company’s control over the work
• Reviewing independent-contractor agreements and job descriptions
• Comparing written policies with actual working conditions
• Assessing exempt-employee duties and compensation
• Calculating unpaid overtime, expenses, and other wages
• Determining whether other workers were affected
• Evaluating retaliation or termination
• Pursuing available relief through negotiation, administrative proceedings, arbitration, or litigation

The Kaufman Law Firm has represented California employees since 1993. Attorney Matthew A. Kaufman brings decades of experience to employee-misclassification, unpaid overtime, wage and hour, retaliation, and employment class action matters.

Clients turn to our firm for:

• Personalized attention from an experienced employment attorney
• Careful analysis of the actual working relationship
• Thorough review of compensation and classification records
• Clear explanations of potential claims and options
• More than $50 million recovered for clients
• Free initial case evaluations