Misclassifying employees as independent contractors is a serious issue in California. Many employers label workers as independent contractors to save on costs, avoid providing benefits, and sidestep wage and hour laws. However, this practice often violates California employment laws and denies workers their rightful protections. As an attorney, I frequently assist individuals who suspect they’ve been misclassified, helping them understand their rights and pursue the compensation they deserve.
California law, particularly under Assembly Bill 5 (AB 5) and California Labor Code § 2775, has established strict criteria for determining whether a worker is an employee or an independent contractor. The state uses the “ABC test” to make this distinction, focusing on the level of control the employer exerts over the worker, whether the work is outside the usual course of the employer’s business, and the worker’s independent business status. Misclassification can lead to wage theft, lack of access to benefits, and other legal violations, making it critical for workers to understand the laws that protect them.
The ABC test is also misunderstood by attorneys and judges, which makes sense, because we were taught a similar ABC test in Law School classes called Torts, and Contracts, to understand Principal-Agent relationships. The “ABC” in a Principal-Agency relationship stands for “Assent, Benefit, and Control.” But for purposes of California employment law, which governs both written, verbal, and implied employment contracts, we use a different ABC test.
Employers and employees cannot necessarily rely on one ABC test over another for independent contractor status when considering various forms of Principal-Agent vicarious liability, e.g. in Wage & Hour Law, Employment Law, Tort, or Contract Law. Can you combine the two ABC tests to achieve the result that a Principal-Agent relationship leads to the Agent forming an employment relationship between Principal and any number of Employees, including the Agent? Can an employer shield itself from liability by using Staffing Agencies? Is there a scenario where an outsourced HR person or staffing agent who meets the Principal-Agent ABC test is also an employee under California’s employment ABC test? The legal permutations could be endless.
The ABC test is the standard method for determining whether a worker is an independent contractor or an employee in California. To classify a worker as an independent contractor, all three of the following criteria must be met:
If the employer cannot satisfy all three criteria, the worker is considered an employee under California law.
Certain occupations and industries are exempt from the ABC test and instead follow the traditional “Borello test,” which considers multiple factors such as the degree of control, the nature of the work, and the level of skill required. Examples of exempt professions include licensed professionals, certain contractors, and business-to-business relationships. However, even these exemptions require careful analysis under California Labor Code § 2775.
Misclassified workers often miss out on minimum wage, overtime pay, and meal and rest breaks guaranteed under California Labor Code § 510. Employers who fail to comply with these wage and hour laws may be liable for back pay, penalties, and interest.
Employees in California are entitled to benefits such as sick leave, family leave under the California Family Rights Act (CFRA), and access to unemployment and disability insurance. Independent contractors do not receive these protections, leaving misclassified workers at a disadvantage.
Employers who misclassify workers may also face significant tax liabilities. California law requires employers to withhold payroll taxes for employees, and failing to do so can result in fines and penalties from both state and federal agencies.
Employers found guilty of misclassifying workers may face penalties under California Labor Code § 226.8, which prohibits willful misclassification. Penalties can range from $5,000 to $25,000 per violation, in addition to other fines and damages.
Workers who suspect misclassification should gather documentation that illustrates their working relationship, such as contracts, emails, work schedules, and payment records. These documents can help establish whether the employer exercised control over the work performed.
Understanding your classification status under California law can be complicated, particularly if your industry falls under an exemption. Consulting an attorney ensures you understand your rights and the legal options available to you.
Misclassified workers can file a claim with the California Division of Labor
Standards Enforcement (DLSE) to recover unpaid wages and other damages. An attorney can guide you through this process and represent your interests.
Employees work under the control and direction of their employer, perform tasks within the employer’s usual business operations, and are entitled to benefits and wage protections. Independent contractors operate their own businesses, have greater control over how they perform their work and are not eligible for the same benefits and protections.
Signs of misclassification include being required to work specific hours, using company-provided equipment, performing tasks central to the employer’s business, and lacking the ability to work for other clients. These factors may indicate an employer-employee relationship under the ABC test.
Misclassified workers can seek unpaid wages, overtime, and benefits. They may also be entitled to penalties under California law. Filing a claim with the DLSE or pursuing a lawsuit are common ways to address misclassification.
Yes, signing an independent contractor agreement does not automatically make you an independent contractor. Courts and enforcement agencies look at the actual working relationship, not just the terms of the contract.
Industries frequently affected by misclassification include gig economy work, construction, transportation, and healthcare. However, misclassification can occur in any industry where employers seek to reduce labor costs by avoiding employee benefits and protections.
AB 5 codified the ABC test as the standard for determining worker classification in California. It expanded worker protections by narrowing the circumstances under which a worker can be classified as an independent contractor while also providing exemptions for certain industries.
Yes, you can file a claim for past misclassification. California law allows workers to recover unpaid wages and damages for a specific time period, typically within three years of the misclassification.
Misclassification of employees as independent contractors is a serious issue in California, and workers who are misclassified often face wage theft, lack of benefits, and other injustices. At Law Office of Joseph Richards, P.C., we are committed to helping workers understand their rights and fight for the compensation they deserve. Whether you need guidance on filing a claim or representation in court, we are here to assist our clients.
If you believe you are being paid unfairly, contact our California employee misclassification lawyerby calling our office at (888) 883-6588 to receive your free consultation. Our firm serves clients throughout the state of California and are ready to help clients address their employment concerns. Let us help hold employers accountable and protect workers’ rights under California law.
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