The misclassification of workers as independent contractors is a serious and persistent problem nationwide, and certainly in California. A study by the U.S. Department of Labor found that between 10% – 30% of audited employers misclassified workers and that up to 95% of workers who claimed they were misclassified as independent contractors were reclassified as employees following review.
Recently, the California Labor Commissioner’s Office brought the first lawsuit under Assembly Bill 5. AB5 is the California law that requires the application of the “ABC test” to determine if workers in California are employees or independent contractors. Under this test, workers can only be classified as independent contractors when a business demonstrates that the workers:
- Are free from control and direction by the hiring company;
- Perform work outside the usual course of business of the hiring entity; and
- Are independently established in that trade, occupation, or business.
AB5 extends employee classification status to gig workers and is designed to regulate companies that hire gig workers in large numbers, such as Uber, Lyft, and DoorDash, and the mobile car wash company, below.
Mobile Wash, Inc.
In the case at hand, Mobile Wash, Inc. used a phone app to offer car washing and detailing services to customers throughout Southern California and Northern California. The mobile car wash company required its workers to use their own cars and buy their own uniforms, insurance, cleaning equipment, supplies and gas. Mobile Wash did not reimburse the workers for these business expenses or travel time in violation of the requirement to pay for all hours worked at no less than the minimum wage. It also unlawfully charged workers a $2 “transaction fee” for every tip left on a credit card.
Not only that, but in the Labor Commissioner’s case against Mobile Wash, they alleges that the company “made a calculated business decision to misclassify” the workers who perform car washing services arranged through the company’s app as independent contractors, as opposed to classifying them as employees.
This all boils down to the Labor Commissioner’s main argument that because Mobile Wash is allegedly a “car wash company in the business of selling car washes to its customers,” and the services that car washers perform are “central to the very purpose of Mobile Wash’s business,” that the company cannot possibly satisfy the “B” prong of the test, which would require an independent contractor to be engaged in work that is outside of the company’s usual course of business.
In addition to the civil penalties recoverable for the state of California for labor law violations, through its lawsuit against Moblie Wash, the Labor Commissioner is seeking to recover the following:
- unpaid minimum wages
- unpaid overtime wages
- unreimbursed business expenses
- meal and rest period premiums
- misappropriated gratuities
- waiting time penalties
- liquidated damages
If you believe your employer has been intentionally misclassifying you as an independent contractor, contact an experienced employment attorney to discuss your legal rights.
To discuss whether your employer has improperly classified you as an independent contractor and not an employee and what wages and penalties that may entitle you to, contact the skilled lawyers at Webb Law Group today.