My employee is suing me because they contend they are misclassified as an independent contractor
Is an employee suing you for misclassifying him/her as an independent contractor rather than an employee?
We excel in protecting employers and business owners from frivolous lawsuits. If a worker is suing you for misclassification, our team will help you develop strategies to get the headache of the lawsuit behind you as quickly as possible.
The biggest recent impact for businesses with regard to independent contractors came from the California Supreme Court who adopted the definition of “employee” in Dynamex Operations West Inc. v. Superior Court of Los Angeles. Under this new standard, it is your burden as the business owner to establish if your worker is an independent contractor. Your worker is an independent contractor if all of the following “ABC” factors are present:
- Is free from control and direction by the hiring company;
- Performs work outside the usual course of business of the hiring entity; and
- Is independently established in that trade, occupation, or business.
Subsequently, after Dynamex Operations West Inc. v. Superior Court of Los Angeles, the California State Legislature passed AB5 which added Section 2750.3 to the California Labor Code starting in 2020. This section of the Labor Code adopted the standard provided in Dynamex and provided exclusions for certain industries from the ABC test. Our staff at Webb Law Group, APC is well-versed in this new law and is very familiar with its practical implications both for business planning and also for defending claims where a business owner has been sued based on this new law.
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Worker Classification Defense FAQ's
Have questions? We are here to help. Still have questions or can't find the answer you need? Give us a call at 559-431-4888 today!
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Is there a grace period for employers to get into compliance with their payroll tax obligations after the effective date (JanuarNo. Employers must pay any payroll taxes that are due based on the employees they have as of the effective date of January 1, 2020.
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What are the employer’s tax responsibilities?Because employers must pay taxes for employees but not for independent contractors, misclassification of workers can constitute tax evasion. Independent contractors must manage and self-report their own tax obligations and can result in tax underpayment if the worker does not understand their responsibilities.
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Are there penalties for misclassifying workers as independent contractors?Yes. In addition to penalties for wage violations associated with misclassification, there are civil penalties for willful misclassification (under Labor Code § 226.8 allow for civil penalties between $5,000 and $25,000 per violation). Willful misclassification is defined as knowingly misclassifying an employee as an independent contractor.