People often want to understand the rules regarding "classification" of employees. These rules determine whether you are subject to the employment laws, whether you are entitled to overtime, and whether you are entitled to meal and rest periods, among other things. You can be misclassified in several ways. First, you can be misclassified as an independent contractor, meaning your employer thinks you are outside the scope of the employment laws altogether. Second, your employer may be misclassifying you are exempt from overtime and meal and rest period requirements. Finally, your employer may think you fall into a partial exemption, like the inside salesperson exemption, which has special rules that are discussed here.
Because classification impacts so many aspects of your work, it is important to understand whether you are correctly classified. Here is what you need to know.
What is the Difference Between an Employee and an Independent Contractor?
In California, all workers are presumptively considered employees when they perform work for an employer. With relatively few exceptions, you are an employee unless the employer can show that you meet the three requirements of the "ABC test." Because independent contractors are deprived the benefits of many of California’s strong employee protection laws, employers often try very hard to misclassify employees as independent contractors to avoid complying with those laws.
Who Can be an Independent Contractor?
A true independent contractor controls how and when they work and can work for multiple clients at the same time. They provide services to businesses and individuals who do not ordinarily compete against them in the marketplace. A typical example would be a licensed plumber or electrician providing services to a household or business.
How Can You Tell the Difference Between an Employee and Independent Contractor?
In California, all workers are presumptively considered employees when they perform work for an employer. With relatively few exceptions, you are an employee unless the employer can show that you meet and three requirements of California’s independent contractor test: the ABC test. Because independent contractors are deprived the benefits of many of California’s strong employee protection laws, employers often try very hard to misclassify employees as independent contractors to avoid complying with those laws.
What is California’s ABC Test for Employees and Independent Contractors?
The ABC test is a generous, employee-friendly test that requires that workers be classified as employees unless the worker meets the following three conditions: (1) they are free from the employer’s control in performing their work, (2) they provide services/work outside the regular course of the employer’s existing business, and (3) they perform work that is customarily provided through an independently established trade or profession.
If your employer doesn’t meet all three of the above conditions, you are an employee—regardless of whether your employer calls you an independent contractor or you signed a contract as one. That said, there are a list of business that are exempt from the ABC test, including insurance professionals, certain medical and other licensed professionals, graphic designers professionals, and a few other groups. These employees may validly contract to be independent contractors, but in that case, must meet another set of strict conditions called the Borello test to make sure they are still not employees in disguise.
What is the Difference Between an Exempt and Non-Exempt Employee?
When people talk about being "misclassified," they may also be referring to being misclassified as an exempt employee. This is a different kind of misclassification and has nothing to do with being an independent contractor.
An exempt employee is type of employee that is exempt from many of California’s worker-friendly laws, including the right to a minimum wage, the right to overtime pay, and the right to paid rest periods and unpaid meal breaks. For example, if you’re an exempt employee, your employer can require you to work more than eight hours or more than 5 days a week without paying you a single extra cent or giving you any breaks. You can learn more about whether you are correctly classified as exempt here.
Talk to an Experienced Minimum Wage and Employment Lawyer
California has a strong public policy to classify workers as employees. Being misclassified can have serious consequences for both you and the employer, including causing tax trouble with the IRS. That's why we aggressively fight employers who are trying to nickel and dime you by misclassifying you as an independent contractor.
At King & Siegel LLP, we have helped hundreds of workers hold employers accountable through legal actions. If you have been discriminated against, retaliated against, denied your rightful wages, or wrongfully terminated, our attorneys are here to help. We have recovered millions of dollars for employees who were misclassified as independent contractors.
Need legal help? We provide free, confidential consultations to California workers. You should contact us as soon as possible to make sure your claim is still within the time limits set by law. If you are a victim of wage theft or other violations of the employment laws, contact us today through our website or give us a call at (213) 214-3757 to schedule a free consultation.