Employers can often improperly designate their workers as independent contractors, depriving them of wages and benefits entitled to them under California law. If you’re an employee misclassified as an independent contractor, call PARRIS Law Firm today to protect your rights.
The Rise of Independent Contractors in California
As technology has changed and living costs have risen, millions of Americans have opted for jobs that let them choose their own schedules and act as their own bosses. According to a QuickBooks study, 28.2% of American workers classified themselves as “self-employed” in 2019—and that was before the coronavirus pandemic forced millions of other workers into gig work.
As more and more businesses have hired independent contractors, the question of what qualifies as an independent contractor in California has risen to the forefront of legal debates.
Independent contractors lack a number of the protections that employees enjoy under California law, including the right to minimum wage, overtime, and meal and rest breaks. This makes independent contractors cheaper for businesses to hire—and many employers took notice. Some companies have opted to classify their workers as independent contractors to save money. Though this may help the business in the short term, this practice strips workers of their fundamental employee rights.
Misclassification harms workers. If you’re an employee misclassified as an independent contractor, you may be missing out on the wages, overtime, and benefits you are owed under California law.
The employment lawyers at PARRIS Law Firm are here to discuss the difference between employees and independent contractors so that you fully understand your rights. Call PARRIS Law Firm immediately for a free case review if you believe you have been misclassified.
What is the difference between an employee and an independent contractor in California?
In general, a worker is an employee if they are subject to the control and direction of the company they work for.
In California, employees usually:
Work at their place of employment on a permanent basis
Receive an hourly wage or salary for their work
Are trained by their employer
Receive equipment to complete tasks from their employer
Perform work that is a part of the hiring entity’s core business
Complete work that is heavily monitored or controlled by the hiring entity
Independent contractors, on the other hand:
May perform specialized work for several clients
Pick their own hours
Bring their own equipment
Perform work outside of the company’s core business
Are free from the control or direction of their employer
Of course, these general differences between employees and independent contractors are far from straightforward. Many workers meet the qualifications for both employees and independent contractors.
Take Uber drivers, for example. Drivers can pick their own hours and use their own cars, like an independent contractor would. But Uber drivers also work at their place of employment on a permanent basis and perform tasks that are part of the company’s core business.
This confusion led the California government to pass Assembly Bill 5 (AB 5) in 2019, which classified all workers as employees unless they pass the three-pronged ABC test:
An independent contractor is free from the employer’s control and direction.
An independent contractor performs work outside the hirer’s core business.
An independent contractor engages in an independently established trade, occupation, or business.
Below, our team will break down AB 5 and other laws in California that govern independent contractor classification. But first, let’s discuss why the correct classification matters.
Why the Difference Between Employees and Independent Contractors Matters
Employees in California are protected by a host of laws, covering issues such as proper wages and hours, discrimination and harassment, workplace injuries, and more. You can read about some of these protections at our Employment Law page.
Independent contractors, however, typically receive much less protection under California law. When employers misclassify employees as independent contractors, one or more of the following occurs, depriving the worker of benefits under the law:
Employer fails to pay minimum wage or overtime for each and every hour worked.
Employer fails to provide meal breaks or authorize or permit rest breaks.
Employer fails to protect the employee from workplace harassment or discrimination under California law. (Visit this page to learn the difference between discrimination and harassment.)
Employer fails to provide unemployment insurance as required under State law.
Employer fails to include the worker for benefits or retirement plans afforded to other employees;
Employer fails to include the worker under the employer’s workers’ compensation plan.
If you’re an employee misclassified as an independent contractor, you may be missing out on these crucial benefits that you are entitled to under California law.
Hiring a PARRIS independent contractor attorney is the best way to protect your rights.
Why PARRIS Independent Contractor Lawyers?
A Firm With Experience
Ever since the PARRIS Law Firm opened its doors in 1985, our trial attorneys have developed a 99% success rate inside and outside the courtroom.
Our employment law attorneys regularly secure seven-, eight-, and nine-figure settlements and verdicts for victims of employment law violations. All told, our firm has put $1.9 billion into the hands of clients.
Our Results Speak for Themselves
Our team has recovered millions in back pay and compensation for victims of employment law violations, including:
A $135 million settlement on behalf of insurance claims adjusters denied overtime and meal breaks due to being misclassified as salaried.
A $29.5 million settlement for employees of a Fortune 500 home improvement company who were working off the clock without being compensated.
A $15 million recovery for employees who were provided with confusing and misleading wage statements that failed to break down employees’ regular and overtime hours.
A $13 million verdict for the victim of a horrific workplace accident at the Tesla Factory Store in Fremont, CA.
Clients Come First
At PARRIS, your case receives personalized, detailed attention. Our investigators spend countless hours gathering documents, witness statements, and depositions to support your case.
We pay special attention to client communication, and we’ll make sure our client care team updates you at every step of your case.
When your employer violates your fundamental rights as an employee, we’re here to ensure you receive the care and treatment you deserve.
No Fees Until We Win
At PARRIS, our legal teams are paid on contingency. That means we advance all costs related to your case, and you pay no fees unless we win your case. If we are unsuccessful, you owe us nothing.
Hiring PARRIS to protect your rights is a risk-free choice. Contact us today for a free case review.
Below, our team has outlined what you need to know to protect your rights.
Dynamex: The ABC Test
In 2018, a case concerning independent contractor classification made it all the way to the California Supreme Court: Dynamex Operations West Inc. v. Superior Court. The case was filed by two delivery drivers at Dynamex who had been classified as independent contractors by the company to save costs.
The Supreme Court of California created an “ABC test” for determining what classifies as an independent contractor in California. In order to classify a worker as an independent contractor, a business must show that:
The worker is free from the employer’s control and direction.
The worker performs work outside the hirer’s core business.
The worker engages in an independently established trade, occupation, or business.
At the time, the ruling applied to issues that arose over wage orders. In other words, the ABC test only classified workers when it came to issues involving minimum wage, meal and rest breaks, and overtime wage violations.
However, this changed with the passage of AB 5 in 2019.
AB 5, passed by the California State Legislature in 2019, codified the ABC test into law. It also expanded the law’s reach to include issues related to unemployment insurance, Labor Code violations, workers’ compensation, and more.
In other words, the ABC test is now the law concerning all employment issues. Misclassified employees are now free to take legal action against their employers and potentially recover overtime wages, meal violations, or other benefits they lost due to misclassification after January 1, 2020 (when AB 5 went into effect).
Exceptions to AB 5
Of course, the nature of some professions require an independent contractor classification that is less stringent than AB 5 and are therefore excluded by the law. These exceptions include, but are not limited to:
Licensed physicians, including doctors, dentists, psychologists, and veterinarians
Securities broker-dealers/investment advisers
These exceptions must be licensed and pass the Borello test, a much less stringent standard that considers the business’s right to control how a worker completes their work.
Factors taken into account in the Borello test include:
Whether the employer controls the manner and means through which a worker accomplishes their tasks (this is the most important factor)
Whether the worker is engaged in a distinct occupation or business
Whether the worker completes work that is separate from the hirer’s core business
The length of the employment relationship
How easily the relationship can be terminated
Whether the worker is supervised
Whether the worker must have a unique skill set
Who supplies the tools to complete the work
Whether the worker can hire and fire other workers
How the worker is paid
Whether the parties believe they are creating an employer/employee relationship
Notably, workers need not pass all 11 factors to be classified as independent contractors.
Other professional workers, such as marketing professionals, artists, designers, or appraisers, may be classified as independent contractors if they pass the Borello test and also:
Possess a business license
Maintain a business location separate from the hiring firm,
Set their own hours and rates,
Provide similar work to multiple clients, and
Exercise discretion and independent judgment while working.
Business to business contractors, construction subcontractors, and event gig workers, such as DJs or caterers, are also exempt from AB 5, provided they meet certain other requirements.
Notably not exempted from AB 5 are app-based drivers. Under AB 5, companies like Uber, Lyft, DoorDash, and Instacart are required to classify their workers as employees, providing them with all of the rights due to employees in the Golden State.
However, these companies fought back. After over $200 million in campaign funding from Uber, Lyft, and DoorDash, voters in California passed Proposition 22, which allowed app-based drivers to remain independent contractors with some additional new rights:
A wage floor of 120% of minimum wage over 2 weeks, plus 30 cents per mile
A healthcare subsidy, provided they work over 25 hours per week
“Occupational accident insurance,” which provides limited coverage for injuries and/or disabilities incurred while working
Though some gig workers saw the passage of Prop 22 as a win, most saw it as a loss. App-based drivers remained ineligible for benefits, unemployment insurance, traditional workers’ comp, and overtime. In addition, some sources claim that the benefits these companies promised have yet to have a positive effect on these workers.
Prop 22 Ruled Unconstitutional
In August 2021, a California Superior Court judge ruled Prop 22 unconstitutional, noting that the law violated the California Constitution by (a) preventing gig workers from unionizing, (b) preventing the workers from having true workers’ compensation insurance, and (c) making it very difficult to change the law once it went into effect.
Of course, the app-based companies have appealed this ruling.
The Independent Contractor vs. Employee Battle Will Continue
The issue of AB 5 and independent contractor classification in California will likely remain a contentious legal issue for years to come.
Until then, you deserve to have your employee rights protected. If you believe you have been misclassified, don’t wait: call a PARRIS lawyer to walk you through your rights.
PARRIS work lawyers regularly represent independent contractors against their employers to fight for their rights and wages accorded under California law. Contact PARRIS today for a free independent contractor case evaluation at (661) 942-7869.