Independent Contractor v. Employee: Am I Properly Classified?
The misclassification of employees as independent contractors is a common error made by employers. Although some employers inadvertently misclassify employees as contract workers due to a lack of understanding of the law, others do so on purpose in order to avoid legal obligations owed to employees. This is because employees have specific rights under California law that are not afforded to independent contractors. Below is some basic information regarding the difference between employees and independent contractors.
Employees versus Independent Contractors
An employee is someone who a California business has hired and has substantial control over how and when work is performed. Generally, the employee performs work for the company that is regularly part of the company’s business. An employee will work at the company’s place of business, have regularly scheduled hours, receive an hourly wage or annual salary, receive direction and training from the company, and is subject to discipline. Often times the California employer provides training, guidelines and other supervision over the work performed by the employer.
On the other hand, independent contractors typically provide specialized work that isn’t related to a company’s regular business and often provide services for multiple clients. Independent contractors often establish their own pay, provide their own equipment, work from their own office or home, and decide when and how the work will be performed. While a client may provide deadlines or specifications for the work needed, the independent contractor determines how best to complete the work and how much time will be spent.
Employee Rights in California
There are several protections afforded to employees under both federal and California laws. Some of the rules that apply to employees but not independent contractors in California include that employees:
- Must have their state and federal payroll taxes withheld by the employer;
- Are eligible for unemployment benefits from the state of California;
- Are entitled to wage and hour protections, such as minimum wages and overtime pay; and
- Are protected from discrimination under state and federal anti-discrimination laws.
Proper Classification of California Workers
In the state of California, numerous state agencies have specific tests to determine whether a worker is an independent contractor. The Employment Development Department (EDD) uses one test if it suspects a California employer was supposed to withhold payroll taxes from the worker’s wages or if a worker is seeking unemployment benefits. The California Division of Workers’ Compensation, on the other hand, uses a different test when analyzing whether or not someone is entitled to workers’ compensation benefits.
The California Supreme Court established a test that employers must meet for employees to be named independent contractors. Companies must show that all of the following are true:
- The worker is free from control and direction, in the contract terms and in actuality, from the company in performing the work;
- The work performed is one that is outside of the company’s regular business; and
- The worker is typically engaged in a trade, occupation, or business – independently – that is the same work as what is performed for the company.
Common Indicators of Misclassification
Misclassification occurs when an employer incorrectly labels a worker as an independent contractor or exempt employee to avoid paying overtime, benefits, and other legal protections. One of the key differences between employees and independent contractors is the level of control an employer has over the worker. Employees typically receive a set salary or hourly wage, must follow company schedules, and use employer-provided tools, while independent contractors operate with more autonomy, setting their own hours and using their own equipment. Additionally, employees are entitled to benefits such as health insurance, paid time off, and workers’ compensation, whereas independent contractors must cover these costs themselves. A Glendale misclassification claims attorney can assess these factors to determine if a worker has been improperly classified.
There are several signs that you may be misclassified, and many employees do not realize they are being denied wages and benefits they are legally entitled to. For example, if you are labeled an independent contractor but are required to work full-time under strict supervision, report to a manager, or use company-provided equipment, you may be misclassified. Similarly, if you are a salaried worker but perform non-exempt duties—such as manual labor, customer service, or routine clerical work—you may be unlawfully denied overtime pay. Workers who suspect they are misclassified should consult a Glendale misclassification claims attorney to review their employment status and recover any unpaid wages, benefits, and penalties owed under California law.
Steps to Take If Misclassified
If you believe you have been misclassified, the first step is to gather evidence supporting your claim. This includes pay stubs, work schedules, job descriptions, emails, and contracts that demonstrate how your employer controls your work and compensates you. Once you have this documentation, you can file a claim with the California Labor Commissioner, which investigates misclassification cases. The process involves submitting a wage claim form and presenting evidence showing that you function as an employee rather than an independent contractor or that you have been wrongly classified as exempt from overtime. A Glendale misclassification claims attorney can guide you through this process to ensure your claim is strong and well-supported.
If misclassification is proven, you may be entitled to significant legal remedies and compensation. This can include back pay for unpaid overtime, reimbursement for business expenses improperly shifted to you, and compensation for lost benefits such as health insurance or retirement contributions. In some cases, penalties against the employer may also be awarded, particularly if the misclassification was willful. If you were terminated or faced retaliation for challenging your classification, you may also seek reinstatement or additional damages for wrongful termination.
Because misclassification claims can be complex, consulting with a Glendale misclassification claims attorney is crucial. An attorney can help you navigate the legal process, negotiate a settlement, or file a lawsuit if necessary. With legal representation, you can maximize your chances of recovering the full compensation you are owed while ensuring your rights under California employment law are fully protected.
Employer Responsibilities & Penalties
Employers who misclassify workers in California face serious legal and financial consequences. If caught, they may be required to pay back wages for unpaid overtime, reimburse lost benefits, and cover unpaid payroll taxes. Additionally, California imposes hefty penalties for misclassification, including fines of $5,000 to $25,000 per violation if the misclassification is found to be willful. Employers may also face class action lawsuits from multiple affected workers, which can lead to significant settlements or court-ordered damages. In some cases, businesses may be liable for civil penalties and legal fees, further increasing the financial burden.
To avoid costly penalties, businesses should take proactive compliance measures. Employers must properly classify workers by applying the ABC Test, which presumes a worker is an employee unless they meet specific independent contractor criteria. Regular payroll audits and consulting with an employment attorney can help ensure proper classification. Additionally, providing clear job descriptions, tracking hours accurately, and training HR personnel on wage laws can prevent misclassification issues. Working with a Glendale misclassification claims attorney can help businesses implement compliance strategies and reduce the risk of costly legal disputes.
Call HBK Lawyers today at 818-696-2306 to schedule your free consultation. We are ready to stand with you, protect your rights, and fight for the compensation you deserve. Contact us to get started with a wrongful termination attorney near you.
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