Attorneys Handling Employee Misclassification Cases in Los Angeles, Kern, Orange, Riverside, San Bernardino, and Ventura Counties

The Difference Between Employee and Independent Contractor

In California, there are significant differences between an employee and an independent contractor in terms of rights, protections, and obligations. Here’s a brief breakdown:

Employee:

An employee is someone who works under the control and direction of an employer with regards to what will be done and how it will be done.
Employees are entitled to various benefits and protections such as minimum wage, overtime, meal and rest breaks, and reimbursement for work-related expenses.
Employers are required to withhold income taxes, pay Social Security and Medicare taxes, and provide unemployment insurance benefits for their employees.

Independent Contractor:

An independent contractor is a self-employed individual who provides services based on a contractual agreement. They have more control over how they complete their work.
Independent contractors are not entitled to the same legal protections as employees, such as minimum wage or overtime pay.
They are responsible for paying their own taxes, including self-employment tax, and do not receive unemployment insurance benefits.

Why Does Classification Matter?

The distinction is important for both workers and businesses. For workers, being classified incorrectly could mean missing out on vital employment benefits and protections. For businesses, misclassifying an employee as an independent contractor can result in significant legal and financial consequences, including penalties and back pay for wages and benefits.

California uses the “ABC” test to determine if a worker is an employee or an independent contractor. Under this test, a worker is considered an employee unless the hiring entity can establish all three of the following conditions:

The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
The worker performs work that is outside the usual course of the hiring entity’s business.
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

This particular area of the law is still developing. The information on this website is based on the current state of California labor law as of the time this web page is updated. One should always consult with a legal professional for the most accurate and up to date information.

Why Do Some Employers Misclassify Employees?

Employers in California may misclassify employees as independent contractors for a variety of reasons. Misclassification could be the result of a mistake, but it is often tied to financial benefits or avoidance of certain liabilities. Here are some common reasons:

Cost Savings: By classifying workers as independent contractors, employers can avoid paying certain costs associated with having employees, such as overtime pay, minimum wage, workers’ compensation insurance, and unemployment insurance. They also don’t have to cover Social Security and Medicare taxes, which can result in significant savings.
Avoidance of Legal Responsibilities and Liabilities: Misclassification allows employers to sidestep various legal obligations. Employees are protected by numerous laws, including anti-discrimination laws, wage and hour laws, and health and safety regulations. By classifying workers as independent contractors, employers can avoid these responsibilities.
Flexibility: Employers might prefer the flexibility that comes with hiring independent contractors, who can be brought on for specific projects and let go when the work is completed, without the need for formal firing procedures.
Reduced Administrative Burden: With employees, employers have to manage payroll taxes, employee benefits, and other administrative tasks. These responsibilities do not exist when working with independent contractors.

However, it’s important to note that misclassification can lead to severe consequences, including penalties, back pay for wages and benefits, and potential lawsuits. Workers misclassified as independent contractors can sue to enforce their rights under California employment laws, potentially recovering lost wages, penalties, and attorney’s fees. One should always consult with a legal professional for questions about employee classification in Southern California.

Contact a Lawyer About Employee Misclassification in Los Angeles, Bakersfield, Orange, Riverside, San Bernardino, and Oxnard

Consulting with a lawyer about employee misclassification in California can be very important for both employers and workers. Here are some reasons why:

Understand Complex Laws: Employment laws, including those related to worker classification, are complex and can be difficult to interpret without specialized knowledge. A lawyer can help you understand these laws and how they apply to your specific situation.
Avoid Legal Problems: Misclassification of employees can lead to serious legal problems, including lawsuits, penalties, and back pay for wages and benefits. A lawyer can help you correctly classify your workers to avoid such issues.
Navigate Changes in Law: Employment laws change frequently. A lawyer can help you stay up to date with the latest changes and ensure your practices comply with current law.
Protect Your Rights: If you’re a worker, a lawyer can help you understand your rights and determine if you’ve been misclassified. If you have been misclassified, a lawyer can guide you through the process of enforcing your rights.
Legal Representation: If a dispute arises regarding worker classification, having a lawyer can be invaluable. They can represent you in negotiations or in court, ensuring your interests are protected.
Advice on Contracts and Agreements: Lawyers can provide advice on drafting contracts and agreements that clearly define the relationship between the business and the worker, reducing the likelihood of misclassification.

Aggressive Representation to Get You the Compensation You Deserve

At Akopyan Law Firm A.P.C., our attorneys stand ready to support employees who have been misclassified. We take pride in serving clients across Southern California, encompassing areas such as Los Angeles, Orange, Riverside, San Bernardino, and Ventura.

When you reach out to Akopyan Law Firm A.P.C., you’ll be directly connected with an attorney, not an assistant, ensuring swift and efficient support. We provide a complimentary initial consultation and may also offer services on a contingency fee basis. If you’re facing issues of misclassification in Southern California, don’t hesitate to contact Akopyan Law Firm A.P.C. today.

Frequently Asked Questions About Employee Misclassification

My boss recently changed my status from employee to independent contractor. Is this right?

Employers sometimes incorrectly classify their employees as independent contractors to avoid paying payroll taxes, the minimum wage, overtime compensation, and complying with other legal requirements such as providing meal periods and rest breaks or reimbursing workers for business expenses incurred in performing their jobs. Additionally, employers do not have to provide coverage for independent contractors under their workers’ compensation insurance and are not liable for payments under unemployment insurance, disability insurance, or social security.

There are many factors that should be considered when analyzing whether a particular worker should be treated like an employee or an independent contractor. Some factors include:

Whether you are performing services different from the employer
Whether the work is a part of the regular business of the employer
Whether the employer supplies the tools and the place for the work
How much control the employer has over you

The most important issue is control. Each situation is different and depending on the circumstances, you may be misclassified as an independent contractor. You should contact an employment law attorney in Los Angeles to discuss your unique case.

Does it make a difference if my boss wants to classify me as an independent contractor instead of an employee?

Yes. Under California law, employees get far greater benefits and protections as compared to independent contractors. There is a big difference under California’s laws dealing with wages and hours (such as meal periods and rest breaks, minimum wage, overtime, etc.), and its anti-discrimination and retaliation laws, which protect employees. Plus, your employment status also affects whether or not you are covered under your employer’s workers’ compensation insurance. If you are an independent contractor, you also are not entitled to unemployment insurance, disability insurance, or social security.

What if my employer retaliates against me if I complain that I am misclassified as an independent contractor and should have been paid overtime or given my meal/rest breaks?

If you question your employer about your employment status, about not being paid overtime, or because you file a claim or threaten to file a claim with the Labor Commissioner and your employer discriminates or retaliates against you in any manner whatsoever, (such as terminating or demoting you) you can file a discrimination and retaliation lawsuit because this is unlawful conduct.

Featured Employee Misclassification Case

Dynamex Operations W. v. Superior Ct., (2018) 4 Cal. 5th 903, 416 P.3d 1

Without question, the leading misclassification case in California is Dynamex. In Dynamex a delivery company filed a petition for writ of mandate seeking to compel the Superior Court to vacate its order denying a motion to decertify a class in a class action lawsuit filed by two delivery drivers alleging that the company had misclassified drivers as independent contractors rather than employees and violated provisions of the state wage order governing the transportation industry. The Supreme Court held that: (1) the “ABC” test applied to determination of whether drivers were employees or independent contractors under suffer or permit work standard in wage orders; (2) sufficient commonality of interest existed as to whether drivers’ work was outside company’s usual course of business, as prong of “ABC” test, and thus resolution on class wide basis was warranted; and (3) sufficient commonality of interest existed as to whether drivers were engaged in independent business, as prong of “ABC” test, and thus resolution on class wide basis was warranted.

Importantly, the Supreme Court explained that when “determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the “ABC” test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

The Court went on to explain as follows: “We briefly discuss each part of the ABC test and its relationship to the suffer or permit to work definition.

1. Part A: Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?

First, as our decision in Martinez makes clear (Martinez, supra, 49 Cal.4th at p. 58, 109 Cal.Rptr.3d 514, 231 P.3d 259), the suffer or permit to work definition was intended to be broader and more inclusive than the common law test, under which a worker’s freedom from the control of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact, was the principal factor in establishing that a worker was an independent contractor rather than an employee. Accordingly, because a worker who is subject, either as a matter of contractual right or in actual practice, to the type and degree of control a business typically exercises over employees would be considered an employee under the common law test, such a worker would, a fortiori, also properly be treated as an employee for purposes of the suffer or permit to work standard. Further, as under Borello, supra, 48 Cal.3d at pages 353-354, 356-357, 256 Cal. Rptr. 543, 769 P.2d 399, depending on the nature of the work and overall arrangement between the parties, a business need not control the precise manner or details of the work in order to be found to have maintained the necessary control that an employer ordinarily possesses over its employees, but does not possess over a genuine independent contractor. The hiring entity must establish that the worker is free of such control to satisfy part A of the test.

2. Part B: Does the worker perform work that is outside the usual course of the hiring entity’s business?

Second, independent of the question of control, the child labor antecedents of the suffer or permit to work language demonstrate that one principal objective of the suffer or permit to work standard is to bring within the “employee” category all individuals who can reasonably be viewed as working “in the [hiring entity’s] business” (see Martinez, supra, 49 Cal.4th at p. 69, 109 Cal.Rptr.3d 514, 231 P.3d 259, italics added ), that is, all individuals who are reasonably viewed as providing services to the business in a role comparable to that of an employee, rather than in a role comparable to that of a traditional independent contractor. (Accord Rutherford Food, supra, 331 U.S. at p. 729, 67 S.Ct. 1473 [under FLSA, label put on relationship by hiring business is not controlling and inquiry instead focuses on whether “the work done, in its essence, follows the usual path of an employee” ].) Workers whose roles are most clearly comparable to those of employees include individuals whose services are provided within the usual course of the business of the entity for which the work is performed and thus who would ordinarily be viewed by others as working in the hiring entity’s business and not as working, instead, in the worker’s own independent business.

Thus, on the one hand, when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having suffered or permitted the plumber or electrician to provide services to it as an employee. (See, e.g., Enforcing Fair Labor Standards, supra, 46 UCLA L.Rev. at p. 1159.) On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will thereafter *960 be sold by the company (cf., e.g., Silent Woman, Ltd., supra, 585 F.Supp. at pp. 450-452; accord Whitaker House Co-op, supra, 366 U.S. 28, 81 S.Ct. 933), or when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes (cf., e.g., Dole v. Snell (10th Cir. 1989) 875 F.2d 802, 811), the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees. In the latter settings, the workers’ role within the hiring entity’s usual business operations is more like that of an employee than that of an independent contractor.

Treating all workers whose services are provided within the usual course of the hiring entity’s business as employees is important to ensure that those workers who need and want the fundamental protections afforded by the wage order do not lose those protections. If the wage order’s obligations could be avoided for workers who provide services in a role comparable to employees but who are willing to forgo the wage order’s protections, other workers who provide similar services and are intended to be protected under the suffer or permit to work standard would frequently find themselves displaced by those willing to decline such coverage. As the United States Supreme Court explained in a somewhat analogous context in Alamo Foundation, supra, 471 U.S. at page 302, 105 S.Ct. 1953, with respect to the federal wage and hour law: “[T]he purposes of the [FLSA] require that it be applied even to those who would decline its protections. If an exception to the Act were carved out for employees willing to testify that they performed work ‘voluntarily,’ employers might be able to use superior bargaining power to coerce employees to make such assertions, or to waive their protections under the Act. [Citations.] Such exceptions to coverage would affect many more people than those workers directly at issue in this case and would be likely to exert a general downward pressure on wages in competing businesses.” (Ibid.)

As the quoted passage from the Alamo Foundation case suggests, a focus on the nature of the workers’ role within a hiring entity’s usual business operation also aligns with the additional purpose of wage orders to protect companies that in good faith comply with a wage order’s obligations against those competitors in the same industry or line of business that resort to cost saving worker classifications that fail to provide the required minimum protections to similarly situated workers. A wage order’s industry-wide minimum requirements are intended to create a level playing field among competing businesses in the same industry in order to prevent the type of “race to the bottom” that occurs when businesses implement new structures or policies that result in substandard wages and unhealthy conditions for workers. (Accord Gemsco, Inc. v. Walling (1945) 324 U.S. 244, 252, 65 S.Ct. 605, 89 L.Ed. 921 [“[I]f the [proposed restrictions on homeworkers] cannot be made, the floor for the entire industry falls and the right of the homeworkers and the employers to be free from the prohibition destroys the right of the much larger number of factory workers to receive the minimum wage”]; see generally Enforcing Fair Labor Standards, supra, 46 UCLA. L.Rev. at pp. 1178-1103.) Competing businesses that hire workers who perform the same or comparable duties within the entities’ usual business operations should be treated similarly for purposes of the wage order. Accordingly, a hiring entity must establish that the worker performs work that is outside the usual course of its business in order to satisfy part B of the ABC test.

3. Part C: Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?

Third, as the situations that gave rise to the suffer or permit to work language disclose, the suffer or permit to work standard, by expansively defining who is an employer, is intended to preclude a business from evading the prohibitions or responsibilities embodied in the relevant wage orders directly or indirectly—through indifference, negligence, intentional subterfuge, or misclassification. It is well established, under all of the varied standards that have been utilized for distinguishing employees and independent contractors, that a business cannot unilaterally determine a worker’s status simply by assigning the worker the label “independent contractor” or by requiring the worker, as a condition of hiring, to enter into a contract that designates the worker an independent contractor. (See, e.g., Borello, supra, 48 Cal.3d at pp. 349, 358-359, 256 Cal.Rptr. 543, 769 P.2d 399; Rutherford Food, supra, 331 U.S. at p. 729, 67 S.Ct. 1473.) This restriction on a hiring business’s unilateral authority has particular force and effect under the wage orders’ broad suffer or permit to work standard.

As a matter of common usage, the term “independent contractor,” when applied to an individual worker, ordinarily has been understood to refer to an individual who independently has made the decision to go into business for himself or herself. (See, e.g., Borello, supra, 48 Cal.3d at p. 354, 256 Cal.Rptr. 543, 769 P.2d 399 [describing independent contractor as a worker who “has independently chosen the burdens and benefits of self-employment”].) Such an individual generally takes the usual steps to establish and promote his or her independent business—for example, through incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like. When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor by the unilateral action of a hiring entity, there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification. A company that labels as independent contractors a class of workers who are not engaged in an independently established business in order to enable the company to obtain the economic advantages that flow from avoiding the financial obligations that a wage order imposes on employers unquestionably violates the fundamental purposes of the wage order. The fact that a company has not prohibited or prevented a worker from engaging in such a business is not sufficient to establish that the worker has independently made the decision to go into business for himself or herself. Accordingly, in order to satisfy part C of the ABC test, the hiring entity must prove that the worker is customarily engaged in an independently established trade, occupation, or business.

It bears emphasis that in order to establish that a worker is an independent contractor under the ABC standard, the hiring entity is required to establish the existence of each of the three parts of the ABC standard. Furthermore, inasmuch as a hiring entity’s failure to satisfy any one of the three parts itself establishes that the worker should be treated as an employee for purposes of the wage order, a court is free to consider the separate parts of the ABC standard in whatever order it chooses. Because in many cases it may be easier and clearer for a court to determine whether or not part B or part C of the ABC standard has been satisfied than for the court to resolve questions regarding the nature or degree of a worker’s freedom from the hiring entity’s control for purposes of part A of the standard, the significant advantages of the ABC standard—in terms of increased clarity and consistency—will often be best served by first considering one or both of the latter two parts of the standard in resolving the employee or independent contractor question. (See, e.g., Awuah v. Coverall North America, Inc. (D.Mass. 2010) 707 F.Supp.2d 80, 82 [considering only part B of the ABC standard ]; Coverall N. America v. Div. of Unemployment (2006) 447 Mass. 852, 857 N.E.2d 1083, 1087 [considering only part C of the ABC standard ]; Boston Bicycle Couriers v. Deputy Dir. of the Div. of Empl. & Training, supra, 778 N.E.2d at p. 968 [same].)”

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