Contractor Misclassification: Understanding the Difference Between Employees and Independent Contractors in California

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Contractor misclassification is a growing issue in California, where employers frequently classify workers as independent contractors instead of employees. The distinction between an employee and an independent contractor is crucial, as it determines what rights and benefits the worker is entitled to. Below we will explain the difference between employees and independent contractors, how California law strongly favors employee classification, and the penalties available to employees who were misclassified as independent contractors.

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Employees vs. Independent Contractors

An employee is a worker who is hired to perform services for an employer, and the employer has the right to control the details of how the work is performed. In contrast, an independent contractor is someone who is hired to perform a specific task or project, but the employer does not have control over how the work is done.

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The distinction between employees and independent contractors is important because employees are entitled to certain rights and benefits, such as minimum wage, overtime pay, workers' compensation, unemployment insurance, and paid sick leave. Independent contractors are not entitled to these benefits and are responsible for paying their own taxes and obtaining their own insurance.

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California Law Favors Employee Classification

California law strongly favors employee classification, especially since the recent passage of AB5 and the three-part test known as the "ABC Test." The ABC Test presumes that all workers are employees unless the employer can show that:

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A. The worker is free from the control and direction of the employer in connection with the performance of the work, both under the contract for the performance of the work and in fact.

B. The worker performs work that is outside the usual course of the hiring entity's business.

C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

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If an employer fails to satisfy ANY of these three requirements, the worker is considered an employee, not an independent contractor.

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Penalties for Misclassification

If an employer misclassifies a worker as an independent contractor, the worker may be entitled to various penalties. These penalties include:

1. Back wages: Misclassified workers can recover unpaid wages, including minimum wage and overtime pay.

2. Reimbursement of expenses: Misclassified workers can recover expenses they incurred while working for the employer.

3. Unemployment benefits: Misclassified workers can recover unemployment benefits they would have been entitled to if they had been classified as employees.

4. Workers' compensation benefits: Misclassified workers can recover workers' compensation benefits if they are injured on the job.

5. Liquidated damages: Misclassified workers can recover liquidated damages equal to the amount of unpaid wages, up to a maximum of $25,000.

6. Attorney fees: Misclassified workers can recover attorney fees if they prevail in an action to recover wages and penalties.

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Contact Phillips & Associates for a Free Consultation

If you suspect that you have been misclassified as an independent contractor, you should contact our law office for a free consultation. Patrick DiFilippo has more than 13 years of experience representing employees and may be able to help you recover the wages and penalties you are entitled to under California law. Don't wait to take action – the statute of limitations for wage and hour claims is generally only three years from the date the wages were due.

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