When you believe you’re being cheated of benefits at work, such as not being paid properly or being denied pay for overtime, meals and rest breaks, you can easily suffer financially as well as become discouraged on your job. Sometimes, the reason for these injustices is because workers have been misclassified by their employers, meaning these workers are considered as independent contractors, rather than employees. Unfortunately, often workers don’t even realize this has occurred, or if they do, they don’t know how to resolve the problem. Here’s what you need to know about employee misclassification and how a California attorney can help you.
What Is Misclassification?
Misclassification, also known as employee misclassification, is the practice of employers not classifying their workers as employees but as independent contractors. This is done so employers can get out of having to pay unemployment benefits, besides other taxes on their workers. Employers also misclassify workers to avoid having to provide unemployment insurance and workers’ compensation.
How Employee Misclassification Hurts Workers, Honest Employers and the Economy
Employee misclassification is one of the worst issues that affect workers. In addition to workers being deprived of important entitlements, such as the minimum wage, pay for overtime and other benefits, they’re also denied medical leave and a safe workplace.
Misclassification also hurts ethical employers and companies that represent their workers correctly and play by the rules. Consider how it can take business away from them and cause them to have to pay more than their fair share.
What’s more, misclassification compromises the entire economy. It can cause financial losses to both the federal government and state governments because of reduced funds for unemployment insurance and workers’ compensation.
Exempt vs. Nonexempt Status
It’s important to know the difference between an exempt and nonexempt status. Basically, exempt employees are paid a salary that is intended for fully covering all the hours they work each week. In other words, employees are not compensated based on how many hours they work and don’t receive overtime pay.
However, nonexempt employees are generally paid by the hour. These employees receive overtime pay, according to the appropriate overtime rules.
What Determines an Independent Worker vs. an Employee?
The main test to determine whether someone is an employee or an independent contractor in California is whether or not the principal has the authority to control and direct how work is done. The IRS has developed a checklist of 20 factors, which are listed on their 4600 IRS manual. For example, the first factor, entitled “PROFIT OR LOSS”, asks if a worker is able to profit or suffer a loss from the work performed.
What California Workers Can Do
It’s critical you be aware of your rights as a worker.
- If you’re a California worker who has been misclassified by your employer as an independent contractor, you need to file a wage claim.
- Once you’ve completed your claim, file your claim with a local office of the DLSE (Division of Labor Standards Enforcement).
- Next, an assigned Deputy Labor Commission will decide what to do after examining the circumstances stated in your claim.
- The claim may be referred to a hearing or conference, or it could be dismissed.
- If a conference is held, you and your employer will receive a notification in the mail, regarding information, including where and when the conference will take place.
- At the conference, it will be determined if your claim is valid and if the problem can be resolved without needing a hearing.
- In most cases, if it isn’t resol.ved, the matter is referred to a hearing. It could also be dismissed because it lacks sufficient evidence.
Considerations and Warnings
- Although employee misclassification is common in lower-paying industries, such as hospitality industries, food services and custodial companies, it can also occur in higher-paying businesses, such as the banking industry.
- If you receive a 1099 form, this doesn’t make mean you’re an independent contractor, according to the Fair Labor Standards Act.
- Furthermore, you’re not an independent contractor just because you’ve signed an independent contractor agreement.
- Even if workers agree to be misclassified, employers are still not allowed to misclassify them.
You don’t have to continue to be mistreated and miss out on significant employee benefits and protections. If you think you’ve been misclassified by your employer, don’t hesitate to call the attorneys at Aiman-Smith & Marcy. Please contact us for a free consultation and find out more about our wide range of legal services.