Being classified correctly at work isn’t just a formality – it’s the difference between having the rights and protections you deserve or being denied basic benefits. Unfortunately, employee misclassification is more common than many realize, especially in industries like construction, delivery services, hospitality, and gig work.
If you’ve been treated as an independent contractor when you should legally be an employee, you could be missing out on critical protections like minimum wage, overtime pay, meal and rest breaks, workers’ compensation, unemployment insurance, and more. At Prestige Legal Solutions, we’re here to help California workers understand their rights and take action if they’ve been misclassified.
What Does “Misclassification of an Employee” Mean?
Misclassification of employees in California happens when a company labels a worker as an independent contractor when they legally qualify as an employee. This distinction matters because independent contractors don’t receive the same wage and hour protections under state and federal labor laws.
Why would a business do this? Often, to cut costs. Employers who misclassify workers avoid paying payroll taxes, overtime, unemployment insurance, and workers’ compensation premiums. But while it might save the employer money, it leaves the worker vulnerable – and it’s illegal under California law.
In 2020, California’s Assembly Bill 5 (AB 5) strengthened rules for determining who counts as an employee. Under the “ABC test,” a worker is presumed to be an employee unless the employer can prove all three of the following:
- The worker is free from the employer’s control and direction in their work
- The work performed is outside the usual business of the employer
- The worker is engaged in an independently established trade or business
If an employer fails to meet this test, the worker must be classified as an employee.
Implications of Misclassification of Employees
Being misclassified affects more than just your job title. It impacts your income, benefits, protections, and legal rights in significant ways.
Loss of Wage and Hour Protections
Misclassified workers may be denied minimum wage, overtime pay, meal breaks, and rest periods required under California labor law. This can lead to lost wages and unpaid overtime.
No Access to Workers’ Compensation
Employees are entitled to workers’ compensation benefits if injured on the job. Independent contractors are not. Misclassification means losing access to medical coverage and wage replacement after a workplace injury.
No Unemployment Insurance
Laid-off employees can apply for unemployment benefits. Misclassified workers cannot. Without this safety net, you’re left without support during periods of job loss.
No Right to Paid Sick Leave or Family Leave
California law requires employers to provide paid sick leave and family leave to employees. Independent contractors aren’t covered, leaving misclassified workers without time off to care for themselves or their families.
No Legal Right to Unionize
Employees have legal protections for organizing and joining a union. Independent contractors do not. Misclassification strips away the ability to collectively negotiate for better pay or working conditions.
What are the Penalties for Misclassification of Employees in California?
Employers who misclassify workers don’t just harm their employees; they can also face serious financial consequences. Employee misclassification penalties can be steep, and employers are expected to take classification laws seriously.
Civil Penalties
California imposes civil penalties ranging from $5,000 to $15,000 per violation. If the employer engages in a pattern of willful misclassification, fines can increase up to $25,000 per violation.
Unpaid Wages and Benefits
Employers can be required to pay back wages, unpaid overtime, and any lost benefits such as unpaid meal and rest breaks or sick leave. They may also be ordered to pay interest and waiting time penalties.
Additional Tax Liabilities
Employers who misclassify workers may be liable for unpaid payroll taxes, unemployment insurance contributions, and disability insurance taxes, plus interest and penalties from state and federal tax authorities.
Stop-Work Orders
In some cases, state agencies may issue a stop-work order, temporarily halting a business’s operations until compliance is achieved.
What to Do If You’ve Been Misclassified as an Employee
If you believe you’ve been misclassified, you don’t have to navigate the process alone. At Prestige Legal Solutions, we’ve helped many workers across California understand their rights and hold employers accountable for wage violations and unfair practices.
Whether you’re still employed or have already left the company, it’s important to document your situation. Save pay stubs, time records, contracts, emails, and any communication that shows how your work was structured and supervised. If you’re wondering how to report a business for misclassification of employees, a claim can be filed with the California Labor Commissioner’s Office. However, having a knowledgeable legal team by your side can make the process smoother and ensure your claim is fully supported.
At Prestige Legal Solutions, we help workers take action against employee misclassification through clear guidance and compassionate advocacy. If you’ve been denied wages, overtime, or benefits because of misclassification, call us at 310-388-0017 or contact our team today to discuss your situation. You deserve to be treated and paid fairly.
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