I am classified as an independent contractor, but I should be an employee
Independent Contractor vs. Employees in California: What’s the Difference?
Understanding the difference between your classification as an independent contractor or employee could prevent you from losing thousands of dollars in wages and other benefits.
With respect to “non-exempt” employees, employers are required to adhere to California’s requirements for the payment of minimum wage, overtime, meal and rest breaks, and many other conditions of employment. With respect to “exempt” employees, California law does not require employers to comply with these requirements.
In 2018, the California Supreme Court issued a unanimous decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which clarified that the “ABC” test should be used to determine whether a worker is an hourly employee (non- exempt) or independent contractor (exempt) under California’s wage order. The Assembly Bill (AB) 5, took effect on January 1, 2020 and will be used by courts to determine employee status. In order to be classified as an independent contractor, an employer must demonstrate that the worker:
- 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.
AB5 ensures that workers who perform core work under company control versus independent business have access to basic labor and employment protections that are denied to independent contractors or exempt employees, see below:
Employee v. Independent Contractor Coverage in California
Source: EPI analysis of California labor laws
At Webb Law Group, APC., our employment law attorneys have in-depth knowledge of the California Labor Code and the differences between independent contractors and non-exempt employees. Our firm is very familiar with employer schemes that may greatly reduce the amount of money paid to you and may entitle you to legal damages including penalties for misclassification. To learn more, please call (559) 431-4888 to set up a meeting with an attorney who can explain your legal options.
An Example of Wage Theft by Misclassifying Employees
For workers, the cost of being misclassified can be detrimental. For example, consider an employee, Jessica, who was misclassified as an independent contractor because she was paid an annual amount of $38,000 (which is less than “two times the state minimum wage for full-time employment” meaning that Jessica could not properly be classified as an employee exempt from overtime pay). Jessica worked on average 45 hours a week. So, her employer is depriving her of 5 hours of overtime each week by misclassifying her as an independent contract. Not only that, but Jessica’s employer is also depriving her of other benefits and protections that she is entitled to under the Labor Code.
Jessica can seek all unpaid minimum and overtime wages, among other damages. Here’s how those damages would be calculated:
A salary of $38,520 is equivalent to an hourly rate of $19.00. To calculate Jessica’s unpaid minimum wages and overtime wages, we use a regular rate of $19.00 per hour and an overtime rate of $28.50 per hour. Because Jessica was not paid for those additional 5 hours each week, her damages would be equivalent to $7,410 each year ($28.50 x 5 hours each week x 52 weeks), not including the pre-judgment interest, liquidated damages, attorneys’ fees and litigation costs that Jessica could also recover in a lawsuit.
Under California law, employees can seek up to four years of unpaid minimum wages and overtime. Those unpaid wages can be considerable. In this example, for a four-year period, Sarah could recover in excess of $29,640, just for her unpaid minimum and overtime wages. The penalties owed to Jessica for failure to pay wages when due, inaccurate paystubs, and missed breaks would likely number in the tens of thousands of dollars as well.
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Worker Classification Disputes 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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What if I signed an agreement stating that I am an independent contractor?California courts will not assume you are an independent contractor just because you signed an agreement stating you are. You can be an employee even if you signed an agreement stating that you are an independent contractor, however, the nature of your work and relationship with the person hiring you governs the type of employment classification.
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Does AB 5 mean that workers will automatically be reclassified as employees instead of independent contractors?No. Labor Code § 2750.3 assumes that all workers are employees and provides the test that a hiring entity would have to satisfy to show a worker is an independent contractor. Workers may seek an attorney if they believe their employer has not evaluated their working condition to ensure workers are properly classified.
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Can workers be considered employees under California law if they are not considered employees under federal law?Yes. Workers may be considered employees and have protections under California law, even if they are determined not to be employees under federal law. This is because the tests used to determine employee status under California law differ from the tests used under federal law, such as the federal Fair Labor Standards Act (FLSA).