California uses a combination of federal laws, like the Fair Labor Standards Act (FLSA), and its regulations from the California Labor Code, Industrial Welfare Commission (IWC) wage orders, and California Division of Labor Standards Enforcement (DLSE) guidelines for employment law. Employees are protected by the laws when it comes to their minimum wage, overtime, and meal and rest breaks. Because of how these laws work together, employees may end up disputing unpaid wages.

California employment law is complex. Therefore, you want to hire a lawyer to help with wage violations, such as not paying for overtime or not allowing breaks, assisting in collecting proof, and planning the most suitable legal action.

At Stop Unpaid Wages, we help file DLSE wage claims, civil lawsuits, and even class actions. Thanks to our lawyers’ knowledge, workers understand their options, such as back pay, liquidated damages, and statutory penalties, for example, under the Private Attorneys General Act (PAGA). If the employer's violation was intentional, we can help you get the most out of your case.

Independent Contractor vs. Employee Status in California

California employers should correctly determine whether their workers are independent contractors or employees. If someone is misclassified, it can result in unpaid wages, back taxes, major penalties, and the risk of being sued. The difference is based on legal rules, not just what someone calls it.

The ABC Test

The ABC test is the main standard used to decide if someone is a worker for most wage and hour laws in California. The California Supreme Court, as well as Assembly Bill 5 (AB 5) and later laws, set out that for a worker to be an independent contractor, the hiring entity must prove all three of the following conditions:

1. Control and Direction

Under the contract and in reality, the worker is not controlled or directed by the hiring entity in how the work is done. It involves looking at the set hours, the order of tasks, and the training needed.

2. Work Outside the Hiring Entity’s Usual Course

The worker does tasks outside the hiring entity’s normal business operations. If a bakery needs an electrician for repairs, that differs from hiring a cake decorator, who is essential for the bakery’s business.

3. Independently Established Trade, Occupation, or Business

Workers are usually involved in a trade, occupation, or business that matches their work. This means the worker runs a business with other clients, licenses, and marketing.

When all three requirements are met, the worker is usually seen as an employee. Certain occupations and agreements not covered by wage orders continue to use the S. G. Borello & Sons, Inc. (“Borello”) test, which mainly looks at who controls the work.

Key Differences in Treatment

The type of worker classification greatly affects how employees are treated.

1. Control and Independence

• Most employees are managed by their employers and must stick to the established schedules and ways of doing things.
• Usually, independent contractors decide when and how to complete assignments, use their tools, and set their work schedules, facing the possibility of earning a profit or suffering a loss.

2. Financial and Tax Responsibilities

• Employers take out payroll taxes from employees’ pay, pay their share, and provide unemployment and workers’ compensation insurance for their staff (who get a Form W-2).
• Independent contractors are responsible for their taxes, including self-employment and income tax (receiving a Form 1099-NEC), and for paying their business expenses.

3. Benefits and Legal Protections

• Minimum wage, overtime, meal/rest breaks, workers’ compensation, unemployment insurance, paid sick leave, and anti-discrimination safeguards are some protections employees are given.
• Normally, independent contractors do not qualify for these benefits. Their rights are in their contract.

California Employee Misclassification

California law considers most workers non-exempt, so overtime, breaks, and minimum wage protect them. Any employer who wants to classify an employee as exempt must show that the employee meets strict salary and job duty requirements.

 If an employee is misclassified, the employer may face major legal and financial problems, such as owing unpaid wages, facing large penalties, and covering the employee’s attorneys’ costs.

What Sets Exempt and Nonexempt Employees Apart?

Under federal and California law, whether a worker is exempt or non-exempt mainly decides if they can receive overtime and other wage protections.

• Exempt Employees. In California, these have to meet the following requirements:

• Salary Basis Test. Being paid the same amount every month, regardless of how much work is done (except in a few cases).
• Salary Level Test. Being paid at least twice the state minimum wage for working full-time. The threshold is adjusted whenever the minimum wage rises.
• Duties Test. Mostly doing executive, administrative, or professional jobs that involve making decisions and exercising judgment regularly. There are also particular standards for computer professionals and outside salespersons.

Correctly exempted employees, who usually have a lot of responsibility, are not allowed to receive overtime. Misclassification, however, means these core laws do not protect employees.

• Non-Exempt Employees. These are:

• People working overtime are entitled to overtime pay (one and a half times their regular rate) for hours worked past the daily or weekly limit and for their first hours on a seventh straight workday. Employees who work more than the usual hours on the seventh day must be paid double for their time.
• Most of the time, employees are paid by the hour. However, they still get overtime pay if they work more than the set hours.
• Employees whose minimum wage cannot be reduced and must have breaks for meals and rest are needed.

Accurately classifying employees must follow California labor laws and protect businesses from major legal and financial problems.

Commonly Misclassified Employee Roles in California

There are many cases where the duties or pay of a job make it difficult to tell if someone is exempt or non-exempt, or if they are an employee or independent contractor.

Examples of these are:

• IT Professionals. While some IT specialists with essential roles may be exempt from overtime (provided they earn enough), most IT support workers doing basic tasks are not exempt and often do not receive overtime pay.
• Transportation Workers. Many drivers are wrongly considered independent contractors in the gig economy, preventing them from receiving basic employee protections.
• Low-Level Retail and Food Service Managers. If someone’s job is mainly non-managerial (such as customer service or stocking) and they do not have much authority, they may not be considered an executive for exemption purposes.
• On-Call and Emergency Responders. They must meet certain responsibilities and earn a certain amount to be classified. Their on-call time is considered compensable if the employer can control them during those periods.

California Laws Targeting Willful Misclassification as Independent Contractors

California uses laws like Labor Code Section 226.8 and Senate Bill 459 to aggressively prevent employees from being labeled independent contractors. A person is said to willfully misclassify when they avoid paying payroll taxes and following wage/hour laws.

Any employer guilty of intentional misclassification may be fined heavily for each violation. The fines can be much higher if the misclassification is done repeatedly. They may also need to post a notice about their violation in a public place for a certain time. Such laws may also make non-attorney consultants liable for advising on misclassification. They punish people who deliberately misuse worker status tests, not the tests themselves.

A good-faith error happens because of a misunderstanding, while willful misclassification is done intentionally to avoid duties. While willful mistakes are penalized, employers can still be responsible for unpaid wages if someone was misclassified, even if it was done in good faith.

Legal Remedies for Misclassified Employees in California

If employees are misclassified in California, they have certain legal options, including:

• Unpaid Wages and Overtime—Getting back unpaid minimum wages and overtime pay, sometimes for a very long time.
• Rest and Meal Break Premiums—Additional money for every meal or break missed because of work.
• Compensation for Business Expenses—Work-related costs that the employer should pay for are the employee’s right to be reimbursed.
• Waiting Time Penalties—If wages are not paid when employment ends, penalties will be added each day for the period specified by law.
• Civil Penalties under the PAGA—Workers can use the Private Attorneys General Act to get civil penalties for Labor Code violations. Misclassification is often linked to several such violations.
• Attorneys’ Fees— Most of the time, employees who win in wage lawsuits can get back what they paid for attorneys and litigation.

Overtime Pay

Not paying overtime is a major violation of wage and hour laws. California requires overtime pay for non-exempt workers, even if the federal Fair Labor Standards Act (FLSA) does not. People who are not paid overtime they are owed may be able to claim the missing wages and additional penalties or interest.

Premium pay for non-exempt employees is required by California Labor Code Section 510. Usually, one and a half times your regular pay is given for hours worked over the daily or weekly limit and the first hours on a seventh consecutive day. A higher rate must be paid for hours worked beyond the daily maximum or on that seventh day. The “regular rate of pay” should include hourly wages and other compensation, such as non-discretionary bonuses and commissions.

Employees are not allowed to agree to forgo their overtime pay. Generally, such agreements are not permitted under the law. Certain executive, administrative, professional, and computer employees can be exempt from overtime. Still, they must fulfill strict duties and earn at least $59,576 a year, much more than the state minimum wage. Employers can face serious legal issues if they misclassify staff as exempt to avoid paying overtime.

Shift Compensation

California law requires that all hours worked be compensated fairly, and there are rules for split shifts and shift differentials when they apply by policy or agreement. A split shift happens when an employee’s day is divided into two or more work periods with a break of more than a standard meal break in between. It can add more stress to employees' workload.

If a non-exempt employee works a split shift, the IWC Wage Orders require the employer to pay an extra hour of wages at the applicable minimum wage. This is in addition to employees being paid for their hours. This premium is mostly for workers who earn close to minimum wage; if their daily earnings from working hours plus the premium are much higher than minimum wage, the premium obligation may be reduced.

For someone to qualify for the split-shift premium, they must be non-exempt, the employer must require the split schedule for convenience, and the break should be longer than a standard meal period. Staff who choose to work a split shift or live at work may not be eligible for overtime pay. Employers should make sure to record hours and premiums accurately.

Shift Differential Pay

Shift differential pay is an extra amount some employers pay for shifts that are not as popular, for example, evenings, nights, and weekends. Though California does not require it everywhere, it is legally enforced if the employer establishes it in their rules or through a union agreement.

The differential may be a flat hourly amount or an increase in the base hourly rate. If a shift differential is given, it should be part of the employee’s regular pay when figuring overtime. If this is not done, overtime is often not paid properly, a common wage violation.

Not giving split shift premiums or shift differentials as promised can lead to serious legal and financial consequences for employers. Workers who are not paid can file a claim with DLSE or take legal action to get their wages. Not paying an employee their full salary can result in waiting time penalties after they end their employment.

Rest and Meal Breaks 

Employees in California who are not exempt are allowed paid rest breaks, usually for ten minutes every four hours (or a major portion of that time). These breaks should happen whenever possible in the middle of each work session. They should be without interruptions, so the employee is not involved in duties or under the employer’s authority. The rest period is not considered a break if a worker is expected to be on call or do any job during the break.

If an employer does not allow or encourage an employee to take a rest break, the employer must pay the employee an extra hour at the regular rate for each day the break is not provided. It is frequently referred to as a “rest break premium.”

California Meal Period Entitlements

Anyone working more than five hours daily is allowed a 30-minute unpaid meal break. The first meal period is usually given before the end of the fifth hour of work. An employee working more than ten hours in a day must be given another 30-minute unpaid meal break before the tenth hour is over.

Employees mustn't be expected to do any work during their meal breaks. If their duties require them to work or stay on the premises (except for brief meal periods allowed by law for some jobs), the meal period is usually paid and not counted as a proper break. There are particular situations where on-duty meals are allowed, and a written agreement from the employee is required.

When an employee does not get a compliant meal period, the employer must pay one extra hour at the employee’s regular rate for every workday the violation took place. The “meal period premium” is not the same as any rest break premium and may be paid on top of it for the same day.

Employees can waive their meal breaks only if they meet certain conditions about their daily work hours (e.g., six hours for the first meal period and ten hours for the second). Everyone should be aware of the waivers and agree to them willingly; ideally, the agreements should be written down.

California’s meal and rest break rules are stricter than the federal law (FLSA), which does not require breaks but states that if an employer offers short breaks, they must be paid.

Restroom Break Access

Apart from scheduled breaks, California employers should ensure employees can use proper, clean restrooms whenever needed. Regular restroom breaks are not part of the required rest periods and should not be included in their total, so long as their number and length are reasonable.

Unreasonably restricting access to restrooms may be against labor law and OSHA standards. Those with medical conditions that require them to use the bathroom more often may be allowed this as a reasonable accommodation.

Back Pay in California

An employee who is owed “back pay” is due compensation for work done in the past that they were not fully paid for, such as minimum wages, overtime, bonuses, premiums for breaks, or unreimbursed expenses. There are strong ways for employees in California to get their wrongfully withheld wages back.

There are several ways employees can make unpaid wage claims. These are:

• Filing a Wage Claim with the DLSE

The Labor Commissioner’s Office provides an administrative way to settle wage-related issues. This method is usually less formal and cheaper than going to court. It may include settlement conferences and a hearing before an officer whose decision could be made into a court ruling.

• Bringing a Legal Action in Civil Court

Workers can take their claims to civil court. This means more evidence can be gathered (discovered) and is usually used for complex or large cases. Successful employees can usually get reimbursed for their attorneys’ fees and costs.

• Bringing a Class Action Lawsuit

If many employees are affected in the same illegal way by their employer, for example, being denied overtime, a class action allows a few employees to file a lawsuit for the whole group.

• Making a Private Attorneys General Act (PAGA) Claim

Aggrieved employees can sue under the PAGA to recover civil penalties for violations of the Labor Code on behalf of themselves, other employees, and the State of California. A portion of the fines is given to employees, and the rest to the state’s Labor and Workforce Development Agency.

Scope of Recoverable Back Pay and Penalties

When back pay is given, the recovery process might comprise:

• Unpaid minimum wages and overtime
• Meal and rest break premiums
• Prejudgment interest on wages that are not paid is usually set by law at a certain annual rate.
• Liquidated damages. Employees could get liquidated damages, including unpaid wages and interest, if the minimum wage is not paid.
• Waiting time penalties
• Attorneys’ fees

Employees should not be delayed since there is a time limit for filing complaints. Usually, wage and hour violations have a statute of three years, although claims based on written contracts may last up to four years. Oral contract claims and PAGA claims generally have their own shorter and unique time limits. If you do not meet the deadlines, you may be unable to make a valid claim.

Although California enforces its laws, the U.S. Department of Labor (DOL) also enforces the Fair Labor Standards Act (FLSA), giving people another way to seek unpaid wages.

Wrongful Termination and Retaliation in California

California employment is usually considered “at-will,” so employers can dismiss workers for any lawful reason or none at all. But there are many exceptions to this rule. Termination that happens for an unlawful reason is considered wrongful termination.

Firing someone because of their race, gender, age, disability, religion, sexual orientation, or other protected characteristics is not allowed by employers. It is against the law to fire an employee for taking approved time off under the Family and Medical Leave Act (FMLA) or California Family Rights Act (CFRA).

Also, California law makes it illegal for employers to retaliate against workers who participate in protected activities. This means you can:

• Report wage theft
• Report unsafe situations or other unlawful actions (whistleblowing)
• File a wage claim
• Help with an investigation

Adding to termination, retaliation can happen through demotion, lower pay, fewer working hours, unfavorable transfers, or any other action that negatively affects a job. If an employer makes the workplace so hostile because of protected activity that it leads an employee to resign, it can be viewed as constructive wrongful termination.

Find a California Employment Law Firm Near Me

The first step to resolving wage disputes in California is to know your rights under the state’s labor laws. Knowing the rules goes a long way if you are not paid, misclassified, denied breaks, or suffer retaliation. Even though the DLSE and civil courts allow claims, figuring out their procedures, paperwork, and deadlines is difficult.

Working with an experienced California employment lawyer is important. At Stop Unpaid Wages, we can examine your case, outline your options, collect evidence, and represent you well in negotiations or court. Seeking our professional advice helps you get the full amount you deserve and makes it more likely that the employer will be held accountable. Call us today at 424-781-8411 to speak to an employment lawyer.