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Misclassification as Independent Contractor

Since 2013 California’s Labor Code Section 226.8(I)(4) has prohibited the willful misclassification of employees by voluntarily and knowingly misclassifying employees as independent contractors. If an employer engages in a pattern or practice of misclassification, the civil penalty ranges from $10,000 to up to $25,000 per employee. An employee terminated for complaining about misclassification may well have a solid lawsuit for termination in violation of public policy and Labor Code 1102.5.

Here are some factors to consider in determining if you have been correctly classified:

1. Do you have an opportunity for profit or loss in your working relationship?

2. Have you investment in equipment or materials or does the employer provide it all?

3. Does your job require special skills not unique to the employer’s “core” business?

4. How permanent is your working relationship?

5. To what extent does the employer control the details of your work?

While the presumption is that you are an employee, some employers believe they can “write” their way out of employment obligations (like contributions to your FICA) by calling you an independent contractor. This has no legal significance whatsoever. Similarly, an employer’s failure to withhold is more properly termed a consequence of their agreement not to properly classify, and not a means of providing independent contractor status. Bain vs. Tax Reducers, Inc., 219 CA4th 110 (2013).

In some cases, eligibility for workman’s compensation insurance is the key reason employers will try to classify you as a contractor. Or, what if an accident occurs during the course of your work? If you are not an employee, the company will take no responsibility. (Of course, what if you are an independent contractor driving a company vehicle? That might limit their exposure to “permissive user” but at the same time give you the employee grounds to claim the employer provided the tools of work, ie, the car).

Smart employers contract only with corporations; thus, it would be difficult to later claim employee status if you are working as an individual. Regularly-issued (like twice a month) paychecks are clearly indicative of an employee relationship. How has your employer paid you? If you are not paid by the project, odds are you are an employee. Did the employer allow you to set your own schedule?

Our firm limits its practice to representing employees only. We file class actions and representative action under PAGA, The Private Attorney General Act.