San Francisco Employee Misclassification Lawyer

Misclassified Employees

Employers sometimes mistakenly or intentionally classify certain workers as independent contractors rather than employees, even though the workers qualify as employees under the law. This “misclassification” usually results in the employees being denied various benefits of employment, including overtime pay, meal breaks, and reimbursement of business expenses. Indeed, the loss of such benefits is not just a by-product of misclassification, it is usually the point of misclassification. According to the National Employment Law Project, employer misclassification abuse has imposed massive costs on workers and denied state and local treasuries of hundreds of millions of dollars in lost tax revenue. The sorts of workers who are often misclassified include truck drivers, janitors, delivery drivers, and home healthcare workers.

HOW DO WORKERS KNOW WHETHER THEY HAVE BEEN MISCLASSIFIED AS INDEPENDENT CONTRACTORS?

The U.S. Department of Labor has published a worksheet that describes the factors that courts generally consider under the Fair Labor Standards Act when determining whether an employment relationship exists. These include:

The extent to which the work performed is an integral part of the employer’s business;
Whether the worker’s managerial skills affect his or her opportunity for profit and loss;
The relative investments in facilities and equipment by the worker and the employer;
The worker’s skill and initiative;
The permanency of the worker’s relationship with the employer;
The nature and degree of control by the employer.

California law is more protective of workers than federal law. Under California Labor Code Section 2750.3, enacted by the Legislature in 2019, a worker is deemed to be an employee rather than an independent contractor of the hirer if any one of the following is true: (1) the worker is not free from the control and direction of the hirer; (2) the worker performs work within the usual course of the hiring entity’s business; or (3) the worker is not customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. Thus, for example, truck drivers or delivery persons who perform work for a delivery or transportation company are employees of the company for purposes of California wage law. Similarly, delivery workers who only perform delivery work for a single company are deemed employees of that company despite being classified as supposed business owners.

WHAT CAN WORKERS RECOVER IF THEY HAVE BEEN MISCLASSIFIED?

So what can a worker who has been misclassified do about it? In California, Labor Code Section 226.8 makes it unlawful to willfully misclassify an employee as an independent contractor. Under Section 226.8, employers can face penalties ranging from $5,000 to $15,000 for each isolated violation of the statute, or $10,000 to $25,000 for each violation of the statute if it is determined that the employer is engaging in a “pattern or practice” of misclassification. California’s Private Attorney General Act (PAGA) permits employees who have been misclassified to collect these penalties in a representative action on behalf of the state. Under PAGA, a successful employee acting as a private attorney general keeps 25% of the penalties collected, while 75% goes to the state.

Employees can also recover their employment-related business expenses and losses under California Labor Code Section 2802. These business expenses could include items like equipment, tools, fuel, and other similar costs that should have been paid by the employer if the employer misclassified the worker as an independent contractor.

Misclassified employees may also be entitled to minimum wage and overtime compensation under California Labor Code Section 510 and Section 1194 and under 29 U.S.C. Section 201 et seq. of the Fair Labor Standards Act.

Employee Misclassification FAQ

What legal rights do independent contractors have?

The rights of true independent contractors are governed by the terms of the independent contractor agreement they sign. However, many people classified as independent contractors are actually employees under California law. In such cases, although labeled an independent contractor, the worker has the same rights as other employees. That includes the right to overtime pay, reimbursement of business expenses, and the right to claim unemployment insurance.

Can you sue a 1099 employer?

The fact that a company reports your pay on an IRS 1099 Form does not mean that you are a bona fide independent contractor. You may still be entitled to recover unpaid wages, overtime, meal and rest break premium wages, and expense reimbursements.

Can an employer fire an independent contractor?

The right to terminate the contract of a true independent contractor is governed by the terms of the independent contractor agreement. Typically, the agreement will give the independent contractor the right to notice before termination occurs. Often, the agreement is only for a short period of time or until a task is completed. An ongoing relationship without end is more like an employment relationship and less like an independent contractor relationship.

What if I am misclassified as an independent contractor?

A worker misclassified as an independent contractor can sue to enforce her rights under California employment laws. That includes the right to sue to recover unpaid overtime and minimum wages, meal and rest break premium payments, business expenses, as well as the right to seek unemployment insurance payments.

Can you sue for employee misclassification?

Yes, a worker misclassified as an independent contractor can sue to enforce her rights under California employment laws. That includes the right to sue to recover unpaid overtime and minimum wages, meal and rest break premium payments, and business expenses. A misclassified worker can also seek to recover statutory and civil penalties for the misclassification.

Can a 1099 employee sue for wrongful termination?

The fact that a company reports your pay on an IRS 1099 Form does not mean that you are not an employee. If you are fired for complaining about unlawful conduct, you can bring a wrongful termination claim. The company’s label does not matter; the Court will decide whether you are an independent contractor or employee.

Can you collect unemployment if you are an independent contractor?

While there may be exceptions, as a general rule, a true independent contractor cannot file for unemployment. Typically, only employees can collect unemployment.

Can an independent contractor sue for retaliation?

Yes, under certain circumstances, an independent contractor may sue for retaliation. For example, many whistleblower laws protect independent contractors as well as employees. Further, the fact that a company calls you an independent contractor does not mean that you are not an employee. If you are punished for complaining about unlawful conduct, you can bring a retaliation claim. The company’s label does not matter; the Court will decide whether you are an independent contractor or employee.

How much can you sue an employer for misclassification?

An employer who misclassifies an employee as an independent contractor may be liable to the misclassified employee for tens or hundreds of thousands of dollars in unpaid wages, benefits, interest, and penalties.

What should I do if my employer has been wrongly classifying me as an independent contractor to avoid California wage and hour laws?

If you believe you have been unlawfully classified as an independent contractor, you should promptly seek legal advice from a wage and hour lawyer experienced in employee misclassification. Strict time limits called statutes of limitation may control how long you have to bring a claim.

The wave of private and federal enforcement actions points to a problem that remains widespread. Workers who believe that they have been misclassified as independent contractors should contact an experienced employment law attorney to discuss their rights and potential remedies.