What is Misclassification?

Misclassification is a type of fraudulent activity that some employers commit when they improperly designate employees as independent contractors for the purposes of avoiding their obligation to comply with state and federal requirements regarding wages, meal periods, work breaks, paid leave and sick days, and payroll taxes. The practice involves falsely determining that a worker who would otherwise qualify as an employee under the law is, instead, an independent contractor who does not qualify for certain benefits and protections.

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How Employees are Impacted

When employers fraudulently misclassify employees as independent contractors, that negatively impacts workers by denying them the opportunities and advantages they would otherwise be entitled to by law. An employee is eligible to apply for and receive workers compensation coverage if he or she is injured on the job, unemployment insurance in the event an employee is laid off through no fault of their own, and family leave protections as set forth in the Family and Medical Leave Act (FMLA), or California Family Rights Act (CFRA). In addition, employees are entitled to protection against employer retaliation and harassment under the law, and employees have a legal right to form a union.

When someone is working in the capacity as an independent contractor, that individual is not protected by the same employment and labor laws as an employee, which allows the employer to avoid many of the obligations that come with offering and abiding by the protections that are granted by law.

1. The worker is performing that work which is outside the usual course of the employer’s business and;
2. The worker is routinely engaged in an independently established business or occupation that offers the same work as that which is currently being performed.

To simply. If the employer has direct control over the worker, the worker is performing work that falls outside of the typical business model of the employer, and if the worker provides that work or service on an independent basis, these are the parameters that establish whether the worker is an employee or an independent contractor.

It’s important to remember that in order for a classification to be made as to whether the worker is an employee or an independent contractor, ALL THREE must be satisfied in order for the worker to be considered an independent contractor. If only one or two are satisfied, or none apply, under the law, that worker is an employee.

When is the ABC Test Inapplicable?

There are some scenarios and occupations that are currently exempt from the parameters of the ABC Test in determining a worker’s status. Under California Assembly Bill 2257, there are over one-hundred occupations that are deemed exempt from the ABC Test ranging from entertainers and artists to salespeople and medical professionals, graphic designers, freelance writers and editors, consultants, and marketers.

How the ABC Test Helps You as a Worker

The ABC Test is an updated version of the legal parameters by which employers are held accountable for ensuring their workforce is entitled to and receiving the proper wages, benefits, and protections under the law. When employers try to misclassify their workers as independent contractors instead of employees, it allows them to shrink certain responsibilities and obligations that might cost them money in order to be in compliance with state and federal labor laws.

Any worker who believes that he or she has been a victim of misclassification on the part of their employer can take legal steps to get the protections and benefits they deserve.

How Employers Benefit from Misclassification of Employees

Employers who commit misclassification are committing fraud and breaking the law because it denies workers their legal rights to a safe workplace where they can earn a fair wage without being exploited or under threat of losing their employment.

Misclassifying employees as independent contractors benefits employers because they don’t have to pay unemployment insurance, workers compensation insurance, or Social Security or Medicare taxes. Employers are obligated to pay out for these benefits for employees but when employers misclassify them as independent contractors, they don’t have to make these payments.

Independent contractors aren’t entitled to workplace protections that employees are granted nor are they eligible for healthcare coverage that employees are entitled to receive under the Affordable Care Act.

Employers who misclassify their employees as independent contractors do so with the intent of saving money on the costs that come with having employees on their payroll. But when an employee is misclassified as an independent contractor, the costs of being hurt or ill while on the job come out of the employee’s pocket instead of being covered by workers compensation insurance. If the employee is laid off through no fault of their own, they are not eligible for unemployment insurance because the employer has not been making payments towards that insurance protection.

The employer benefits financially while the employee is left without protection and, in many instances, the employee isn’t aware that he or she has been misclassified until faced with the sobering reality of what’s happened.

The Law Office of Fahim Rahman has been helping employees who have been misclassified as independent contractors protect their rights under employment and labor laws, taking employers to court when they refuse to meet their legal obligations to their workforce.

An employee who feels that he or she has been misclassified as an independent contractor should alert their employer and ask why they are considered the latter instead of the former. Request that a reclassification or reconsideration be made and if the employer refuses to do so, there are other methods available through the courts.