Employee Misclassification in California: Ensuring Fair Treatment and Proper Compensation
Employee misclassification occurs when California employers improperly classify workers as independent contractors rather than employees, often to avoid providing benefits or complying with wage and hour laws. Misclassifying employees as independent contractors puts those workers at a disadvantage as they can be denied employee benefits and legal protections that are rightfully theirs to enjoy under federal labor laws such as the Fair Labor Standards Act and California labor laws, including the California Family Rights Act and the Family and Medical Leave Act. These employment laws ensure that eligible employees have the right to workers compensation coverage if an injury is sustained while on the job, unemployment insurance in the event of lay-offs, protections against retaliation and harassment in the workplace, protections for taking family leave under qualifying circumstances, and the right for employees to unionize.
An employee misclassified as an independent contractor is typically the result of an employer shirking his or her responsibilities to comply with fair wage and hour laws that govern minimum wages, meal periods, rest breaks, payroll taxes, unemployment benefits, overtime pay, and paid leave and sick days that employees are entitled to but independent contractors are not necessarily eligible for based on their employment status.
Key Points of Employee Misclassification
The following are some of the most important components of the employee-employer relationship and how willful misclassification cheats employees out of their legal rights to a safe and equitable workplace while an employer’s business continues to thrive as that employer elects to avoid paying their fair share into the programs that benefit and support employees.
Why Employers Misclassify Workers: Determining Employee vs. Independent Contractor Status
An employer will opt to misclassify one or more workers as independent contractors as a way to cut costs that would otherwise go towards paying into unemployment insurance and workers compensation funds as well as Social Security and/or Medicare taxes. Under state and federal labor laws, employers must pay for these benefits when a worker is considered an employee. But they are not bound by law to make these payments for workers who are independent contractors.
The ABC Test
Proper classification in California depends on factors such as the degree of control exercised by the employer and the worker’s level of independence.
The ABC test was established to delineate proper classification of a worker as an employee or an independent contractor by establishing a set of criteria that apply to the duties and responsibilities of the worker and his or her contributions to an employer’s business.
The test is made up of three conditions, all of which must be met, for an employer to properly classify a worker as an independent contractor. If the employer does not meet all three conditions, the worker is instead classified as an employee, entitled to the workplace protections and benefits under the law. These conditions are the following:
Direct Authority
The worker is NOT under the direct authority or control of the employer when completing the work for which that worker has been contracted to execute and in actuality of performing that work.
Employer's Business
The work being performed by the worker is outside the usual course of the employer's business.
Independently Established Trade
The worker performs work that qualifies as an independently established trade, routinely completing work of the same nature for other employers that is being performed for the employer attempting to properly classify the worker in question.
In order for a worker to receive proper classification as an independent contractor, all three of the conditions of the ABC Test must be met in their entirety. If even one of them does not apply to the worker, that individual therefore qualifies for employee status and the employer is bound by law to meet the obligations of providing the protections and benefits afforded to that employee.
Consequences of Employee Misclassification
Misclassified employees in California may be denied benefits, overtime pay, and other legal protections. The worker is not assured of a safe workplace nor is that individual afforded the many benefits that come with employee status.
For example, an employer is prohibited from retaliating against any employee who wishes to take family leave by demoting that worker or terminating their employment. Another example, if an employee uncovers gross negligence, unsafe conditions, or illegal activities in the workplace and he or she reports these conditions to a state or federal regulator, that employee would qualify for whistleblower protection under the law.
These protections are not available to independent contractors.
Unemployment insurance and workers compensation benefits are also afforded to employees but unless the employer has been making the necessary payments towards these benefits, the money won’t be there when it’s needed most. Employers will misclassify workers as independent contractors as a way to avoid paying for their employees’ unemployment and workers compensation funds.
But when the employee is injured or gets sick on the job or if the employee loses his or her job through no fault of their own, that employee is left paying for healthcare and other related costs out of pocket and struggling to make ends meet as he or she looks for a new place of employment. This is all because the employer misclassified the employee as an independent contractor in order to avoid paying for these benefits since independent contractors are not eligible for unemployment insurance or workers compensation benefits.
Remedies for Misclassification
Employees who have been misclassified as independent contractors in violation of federal labor statutes and California employment law have options. Victims of misclassification in California can recover unpaid wages, benefits, and civil penalties.
Taking your employer to court can be a challenging task, one that requires thorough knowledge of the California labor code and experience with handling these matters in a court of law. You don’t need to go it alone, the Law Office of Fahim Rahman is ready to help you protect your rights.