Can Independent Contractors Claim Employee Benefits?


An individual was misclassified by his company for many years as an independent contractor, when in fact he was an employee. Due to the misclassification the individual was not eligible to participate in his company’s 401k plan or sign up for health benefits. After ten years of employment, the company laid him off and the individual realized that he was being misclassified. Is it possible to recover the money that the individual was denied due to the misclassification.


Yes, it is possible to recover the money, but the case may have to be litigated in federal court. Most employee benefits are regulated by the Employee Retirement Income Security Act of 1974 (ERISA). To determine if ERISA applies, the attorney who takes on the individual’s case will need to compare ERISA to California law to determine if ERISA pre-empts California law. A cause of action is pre-empted (1) if the individual could have brought a claim under ERISA § 502(a)(1)(B) and (2) “there is no other independent legal duty that is implicated by a defendant’s actions.” Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 946 (9th Cir. 2009)

In brief, there are two types of law in the United States: federal law and state law. Federal law may pre-empt or trump state law. Avoiding a constitutional analysis for the sake of this blog, the key question is whether the individual’s claims alleging entitlement to 401k contributions and to health benefits payments involve state law issues or are covered by ERISA section  502(a)(1)(B) and (2). 

If the individual’s complaint alleges state-law claims only, and these claims are completely covered by ERISA section 502(a), then it becomes a federal claim under the well-pleaded complaint rule.

To determine whether state-law claims are completely preempted under Section 502, courts apply the two-step test set forth in Davila: “a state-law cause of action is completely preempted if (1) `an individual, at some point in time, could have brought [the] claim under ERISA § 502(a)(1)(B),’ and (2) `where there is no other independent legal duty that is implicated by a defendant’s actions.'” Marin Gen., 581 F.3d at 946(quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004)).

The foregoing discussion is not legal advice and does not illustrate any specific situation. If you have a question regarding employee benefits or your rights as an employee, contact the experienced California employment law attorneys at Stephen Danz & Associates today for your free consultation.