Misclassification as an Independent Contractor

Misclassified by employer in CaliforniaThe misclassification of employees as independent contractors is a widespread problem in the State of California. Studies show that as many as a third of all workers in certain industries are improperly classified.

People working in hundreds of different occupations in California are routinely misclassified, including:

  • Truck drivers
  • Construction workers
  • Technical workers
  • Drivers and couriers
  • Exotic dancers
  • Data entry workers
  • In-home care providers
  • Agricultural laborers
  • Movie projectionists
  • Stagehands

The growth of the “on-demand” economy and crowd sourced labor has encouraged businesses to treat workers as if they were employees while denying them the benefits and rights to which employees are entitled.

Despite the efforts of the California Department of Industrial Relations to encourage employers to obey the law, misclassification of employees is a rampant and growing problem in California. If you work for an employer that compensates you as such and you suspect that you should be paid as an employee, The Cooper Law Firm can evaluate your case and advise you whether you are entitled to a remedy.

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Employers Benefit from Misclassification

Misclassification as an Independent Contractor

Independent contractors are not protected by minimum wage or overtime laws. Employers are not required to pay their share of social security taxes on compensation they pay to these employees. Labor laws that require employers to provide meal and rest breaks do not apply to these workers.

Employers do not cover independent contractors when they purchase workers’ compensation insurance or pay into unemployment compensation funds. They are not required to reimburse business expenses or to include them in the group health insurance coverage that they offer to their employees. Important laws that protect the rights of employees, including the right to take a family or medical leave, the right to be free from workplace discrimination and harassment, and the right to unionize do not apply to independent contractors.

Employers have an incentive to save money and to avoid legal liability by improperly labeling employees as independent contractors. When they do so, employees lose income and other valuable rights. The Cooper Law Firm helps employees who have been misclassified recover back pay and other financial losses that resulted from the misclassification, while compelling employers to reclassify the workers as employees.

What is the Definition of an Independent Contractor?

An Independent contractor is a person, corporation or business which provides a service or product to an entity based on terms agreed upon from a contract or verbal agreement.  Unlike regular employees, income tax is not withheld from independent contractors.

What does it mean to be a 1099 employee?

If you are classified as an independent contractor, you will receive a 1099 form. Employees will receive a different form called a W-2.  Payroll taxes are deducted from W2 employee pay and paid to the government.

Do I pay taxes for independent contractor?

According to the IRS, you must generally withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee.  For independent contractors, you don’t generally need to pay or withhold taxes on payments.

 

California Test

If you own your own business and provide services to a number of customers on your own schedule, you are probably an independent contractor. If you primarily work for one employer and that employer is dictating how, when, or where you do your job, you might be entitled to be paid as an employee, not as an independent contractor.

The extent to which an employer controls the details of a worker’s job performance (for example, by setting hours of work, providing close supervision of the work or dictating how the work is performed) is an important factor that guides decisions about whether a worker is an employee. Control is not, however, the only factor and it is not always the most important factor. Instead, California courts and administrative agencies, like the federal Department of Labor, focus on the degree to which a worker is economically dependent upon the business to which the worker provides services.

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The “economic realities” takes into account a number of factors in the context of a specific industry, including:

  • the employer’s right to control the work;
  • whether the worker’s opportunity for profit depends on the worker’s managerial skill;
  • whether the worker employs helpers or has invested in equipment or materials required for his task;
  • whether the service rendered requires a special skill;
  • whether the work performed is permanent or temporary; and
  • whether the service rendered is an integral part of the alleged employer’s business.

In the leading case applying this test, the California Supreme Court decided that “share farmers” who were hired to harvest cucumbers were not independent contractors, even though they set their own hours, were given little supervision, and were paid a share of price at which the cucumbers were sold. They were considered employees because the work required little skill, the profits they shared were not dependent on their management skill, and the economic reality of the agricultural industry dictated how and when the laborers would work. Since harvesting is an integral part of the employer’s farming business and since the workers depended on the employer to plant, cultivate, fertilize, and spray the crops, the court decided that the share farmers were functionally serving as employees.

California law presumes that workers are employees. It puts the burden on employers to prove that they have properly classified their workers as independent contractors rather than employees. In many instances, employers are unable to meet that burden.

Remedies for Misclassification

Labor Employment Laws - Remedies for Misclassification

Section 226.8 of the California Labor Code makes it unlawful for any employer to engage in a willful misclassification of an employee as an independent contractor. The statute imposes substantial penalties upon employers who violate the law. The Labor Code’s Private Attorney General’s Act allows employees to share in those penalties in some instances.

Other California laws permit employees to seek injunctions to prevent employers from continuing to violate the law, as well as restitution for unpaid overtime and other earnings and benefits that the worker was entitled to receive. When employees are forced to pay expenses that should have been borne by the employer, section 2802 of the Labor Code authorizes the worker to bring legal action to recover those losses as well as attorney’s fees that the worker incurs to enforce those rights.

In addition, California law prohibits employers from retaliating against workers who complain that they were misclassified. An act of retaliation can result in the imposition of a civil penalty, payable to the worker, of up to $10,000 per violation, in addition to reinstatement and reimbursement for lost wages and work benefits.

The Cooper Law Firm provides aggressive representation of workers who have been improperly classified as independent contractors. If the facts support your right to be classified as an employee, The Cooper Law Firm can help you obtain the remedies to which you are entitled as a result of your employer’s unlawful conduct.

Misclassification Assistance

If you believe that you have been misclassified or would like to find out if you have been misclassified, speaking with an attorney will provide you with the tools needed to properly evaluate your circumstance.

Those who would like to obtain a free case evaluation from an experienced California attorney can call The Cooper Law Firm for a free, no hassle case evaluation.

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The Cooper Law Firm handled an employment/class action lawsuit for me. I was initially a bit weary, considering all the negative stereotypes that revolve around lawyers, but I need not have worried! From the very beginning, Scott was nothing but kind and courteous, and he explained each step of the legal process and answered all of my questions with patience. My case was handled with smooth precision, and I was very happy with the results. Last, but definitely not least, Scott's legal assistant, Andrea, was always very prompt in answering any questions and putting me in touch with Scott, and she was always very warm in her interactions with me.

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