An employment-law litigator with over 20 years’ experience, Steven Tindall is well-acquainted with navigating the ins-and-outs of independent-contractor misclassification lawsuits. His largest recovery in a single employment case is $29 million.
Your employer says you’re an independent contractor, but are they right?
Many employers misclassify workers to avoid giving them California overtime pay and minimum wage. But their workers can file a lawsuit for misclassification and can recover penalties as high as $25,000 per worker.
Below we discuss the legal test for whether someone is improperly classified as an “independent contractor” under California independent-contractor misclassification law.
Misclassified as an Independent Contractor?
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Misclassification as an Independent Contractor Under California Law (2018)
Different states use different tests for determining whether someone is misclassified as an independent contractor under their state’s labor code. In 2018, the California Supreme Court adopted the “ABC test” for determining whether someone is properly classified as an independent contractor. The “ABC test” is the most favorable test for independent contractors trying to prove that they are entitled to “employee” status.
(A) The Worker Is Free From The Company’s Control
The company must prove that the worker is free from its control in performing the work.
If the company sets your work hours, requires you to show up at a particular location every day, requires use of company equipment or uniforms, has training sessions and manuals, or requires you to report to a “manager,” the company may be exercising so much control over the worker that he or she must be classified as an “employee.”
(B) The Job Falls Outside the Company’s “Usual Course of Business”
To validly classify someone as an independent contractor under California law, the company must prove that the worker’s job functions fall outside the company’s core business.
For example, a company that primarily does delivery or transportation must classify its drivers as “employees.” They are part of the company’s core business. In contrast, a delivery company may be allowed to classify the security guards at its headquarters as “independent contractors.”
Example 1 | John is an accountant who is retained each year to do taxes for a steel manufacturer. John is validly classified as an independent contractor.
Example 2 | Terry works as an accountant for an accounting firm. Terry is misclassified as an independent contractor under California law.
(C) The Worker Typically Operates a Separate Business From the Company
Under the third part of California’s independent-contractor test, an employer must prove that the worker is “customarily engaged” in a business, occupation, or trade that is independent from the company.
Someone who only works for a single company, ever, usually must be classified as an “employee.” A legitimate independent contractor, under the ABC test, is someone who is in-business for themselves.
Reminder: Company Must Prove All Three Elements
If the employer fails to prove any of the three “ABC”s, the worker must be classified as an “employee” rather than an “independent contractor.” Or, stated another way, an “independent contractor” is misclassified if the company fails to prove all three of the above requirements.
Chart: California’s “ABC Test” for Independent-Contractor Misclassification
|Company must prove that:|
|(A)||The worker is free from the company’s control in how they perform the work.|
|(B)||The type of work performed falls outside the company’s usual business.|
|(C)||The worker is in-business for themselves, not just employed by the company.|
Damages and Penalties for Independent Contractor Misclassification in California
If you’ve been misclassified as an independent contractor, you may be entitled to damages and labor code penalties, which can quickly add up to large amounts of money.
Aggrieved workers can file a lawsuit, under California’s Private Attorney General Act, to recover a share of the total labor code penalties that the state of California is entitled to. In the case of misclassification, the California labor commission is entitled to between $5,000 and $25,000 for each worker that the company intentionally misclassified.
As part of an individual or class action, misclassified workers are entitled to recover all the money they should have been paid if they had been classified correctly, including reimbursement of business expenses and payment for all hours worked. Misclassified workers are entitled to earn at least California minimum wage ($11) for each hour worked, and overtime rates for hours worked above 40 per week.
Example 1: Luiz is a security alarm technician who is classified as an independent contractor. The company pays him a rate of $40 per installation (regardless of how long it takes). Luiz works a job that turns out to be surprisingly complex, and it takes 8 hours instead of the typical 2 hours. Luiz gets $40 for the whole job, a wage of only $5 per hour. If a court finds that Luiz was misclassified as an independent contractor, he will be entitled to California minimum wage for the 8-hour installation, which is $88, more than double what the company originally paid him ($40).
Example 2: Meredith is a hair stylist working as an independent contractor for a salon. She earns $20 for every hair cut she performs. A man walks in with knotted dreadlocks that haven’t been cut or groomed in 4 years. It takes Meredith 3 hours to finish cutting his hair. If she’s misclassified under California law, she’s entitled to earn at least $11 per hour for that haircut, or $33 total.
How to Sue Your Employer for Misclassification in California in 2018
If you think you were misclassified and are entitled to a recovery, what are your options for suing? You could retain an attorney and file a class action or a private attorney general lawsuit, or both. You could represent yourself in small claims court, but filing a small claims case in California will limit the amount you can recover to $10,000. If your contract with the company has an arbitration clause, you could represent yourself or retain an attorney to represent you in arbitration. Generally, arbitration awards are significantly higher for parties represented by an attorney, compared to parties that represent themselves.
Our attorneys often represent workers in class actions, private attorney general lawsuits, and in arbitration.
Featured Members of Our Employment Law Practice
Prior to joining us at Gibbs Law Group LLP, Linda Lam worked at a national employment law firm, where she represented workers in lawsuits to recover unpaid wages and benefits.
Steve has prosecuted a variety of complex employment cases involving misclassification of independent contractors. He is fluent in English and Spanish.
Our California Employment Practice
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Largest Penalties Available under CA Labor Law
The penalties for independent-contractor misclassification in California are the largest that the labor code has to offer. As an aggrieved current or former employee, you may be able to recover these penalties on behalf of yourself and your co-workers. Contact us for a free consultation.
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