Did you know that your employer can save ample amounts of money simply by misclassifying workers as independent contractors? Despite the illegal nature that the act of purposefully misclassifying employees entails, many employers in California and across the nation still continue the unfair practice.
In a recent employee misclassification suit, more than one hundred current and former employees at a Bay Area eatery claimed that they were misclassified as salaried workers, which allowed their employer to avoid paying overtime. In a similar vein, the massive class action lawsuit against Uber was brought on by drivers who claimed that the on-demand ride company misclassified employees as independent contractors; which allegedly allowed Uber to pocket more cash.
It's important for California workers to understand what employee misclassification entails in order to determine whether they are independent contractors or employees.
Understanding Employee Misclassification in California
What is employee misclassification?
Employee misclassification is when an employer labels its workers inaccurately - and often, on purpose. Employers who are guilty of employee misclassification label workers as independent contractors instead of employees for the sheer fact that they can avoid business costs like unemployment taxes, unemployment insurance, health insurance, worker's compensation, and more. Additionally, independent contractors are not offered the same legal protections that employees have with respect to wage and hour laws and employee benefits.
Employee misclassification is a greedy, unethical, and illegal practice that not only negatively affects workers, but also results in millions of dollars in tax revenue losses each year for state and federal governments.
How do I know if I'm an independent contractor or an employee?
It can be a difficult task for both employers and workers alike to figure out one's employment status. Many factors must be considered by all parties to prove certain degrees of control and independence (behavioral control, financial control, relationship type). Generally speaking, you can ask yourself the following questions to try and determine if you are an independent contractor (self-employed) or an employee:
- Does a company pay you for your time, or for your results? If you get paid for your time spent on tasks, you may be an employee. If your pay is contingent on results, you may be an independent contractor.
- Is your work integral to a business? You may be an employee if a company pays you to do something that brings it most of its profit.
- Are you investing your own money into the company you work for? You are probably an independent contractor if you own tools, equipment or other materials that keep the company functioning.
- Do you have a permanent or temporary working relationship with the company? You are more likely to be an employee if you have a permanent relationship with a business.
- Do you have a fixed schedule, and a boss that tells you what kind of work to do, and when? If so, you are probably an employee, as independent contractors usually set their own hours and schedules and exercise their own business initiatives.
What can I do if I'm misclassified by my employer?
If you find that your employer has misclassified you as an independent contractor, you should first have a discussion with your employer and ask if the company will review your status in order to reclassify you appropriately. If your employer is attempting to skirt the law and will not comply with your request, you should contact an employment attorney to discuss filing an employee misclassification lawsuit against your employer.
Additionally, you should think about filing IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding to get your taxes on track. If you have been misclassified as an independent contractor, you will have to pay many taxes out of pocket instead of having your employer pay some of them for you. And if you were fired or laid off and misclassified as an independent contractor, filing an unemployment insurance claim with a state agency will help to investigate the issue.
Misclassification of Employees in California: For Further Reading
- Employees vs. Independent Contractors: What's the Difference?
- Employees vs. Independent Contractors via NOLO.com
- Employee Misclassification Resources via NCSL.org
- Misclassification of Employees as Independent Contractors via The United States Department of Labor
- Worker Misclassification in California via State of California Department of Industrial Relations
If you have been misclassified as an independent contractor in California, rest assured that California and Federal labor laws are on your side. Contact our experienced California worker misclassification attorneys at Hennig Ruiz for a free consultation today.