Most employers pursue tax benefits at the expense of workers by categorizing workers as independent contractors and not employees. If categorized as an independent contractor, you will receive a 1099 tax form instead of a W-2. Unlike independent contractors, miscategorized employees do not access the benefits that accrue from being employees of a company. This miscategorization is illegal; you can file a case against your employer. If you are a 1099 independent contractor, you are not entitled to overtime pay since only non-exempt employees are entitled to overtime pay. If you or your loved one has been miscategorized as a 1099 independent contractor in California, our attorneys at Stop Unpaid Wages can help.

Independent Contractors

Independent contractors are people who provide services for monetary compensation under a contract. An independent contractor's working conditions differ from those of a non-exempt employee. These differences include working hours, the rate of payment per hour, the nature of the work, and overtime compensation. You have freedom while working as an independent contractor. Unfortunately, the disadvantage of this arrangement is that your contract voids some of the protections that other workers enjoy. Some of the protections include wage and hours laws and overtime compensation laws. Companies often provide working terms to people eligible to be under an employer-employee agreement. However, these companies compensate employees under independent employer-contractor terms to dodge overtime responsibility.

Sectors That Misclassify Workers

The following employees are routinely misclassified as independent contractors when they should be considered employees:

  • Welders
  • Home healthcare
  • Financial
  • Computer or IT help desk
  • Insurance
  • Installation work
  • Inspectors
  • Manufacturing or industrial
  • Oil and gas, or petrochemical, or energy
  • Clean-up and disaster recovery
  • Construction
  • Anyone who secured a job through a staffing agency

You are entitled to overtime pay if you work in one of the above companies and work more than 40 hours per week.

The Difference Between An Independent Contractor And An Employee

According to the labor laws, an independent contractor is a person who offers a service to someone else and is compensated for the specific work performed. The contractor guides on how the work should be done. The ABC test is used in California to categorize people as independent contractors or employees. All workers are considered employees. However, an employee will be regarded as an independent contractor if:

  • An employee does work other than that which is usual for the hiring company.
  • An employee is engaged independently in tasks of the exact nature of those handled by the company in focus.
  • An employee controls the project or the duty assigned. This means the employee oversees the job’s direction and is liable for its outcome.

The ABC test addresses crucial matters for most workers. The judge will examine the nature of your work relationship to determine if you are an independent contractor or an employee. He/she will not consider the signed document that claims you are an independent contractor. You will be deemed an employee if your working relationship does not meet the above criteria.

The above factors are not only the ones that differentiate between an independent contractor and an employee. Various aspects help establish the nature of the working relationship, including:

  • Independent contractors have jobs that are time-specific. This means their projects take a specific time. On the other hand, employer-employee contracts are continuous engagements.
  • Independent contractors offer training to all their staff working on a project.
  • Independent contractors provide the equipment required to finish a project
  • Independent contractors have discretion on who does the project and the type of work assigned to them.

Understanding Wage Laws

California wage laws cover employee compensation plans. Unfortunately, these laws do not protect independent contractors. It is often a challenge for workers because most employers classify their workers as independent contractors, denying them their rightful compensation. Under the wage law, workers are entitled to the following:

Minimum Wages

You are entitled to a wage according to the wage and hour law. Under this law, payments are set as follows:

  • Employers with 25 workers or fewer should offer $11 per hour
  • Employers with more than 26 workers should offer $12 per hour

The wages are often set according to the state wage rates. Many counties and towns, however, have adopted higher minimum wage rates.

Overtime

Non-exempt employees are the only people who qualify for overtime payment. Administrative and professional employees and company executives are excluded from this law. Exempt employees are:

  • Individuals earning a monthly salary at least double the minimum wage for full-time employment. Job engagements are deemed full-time if the job takes 40 hours per week.
  • Individuals who have discretion and exercise independent judgment while carrying out their duties.
  • Individuals who take at least half their time handling managerial, intellectual, strategy formulation, or creative work.

The following class of workers is also considered non-exempt:

Private School Tutors

Private K-12 tutors must teach students, exercise discretion, and use independent judgment. These individuals have degrees or higher degrees from recognized universities. You must possess valid teaching qualifications.

White-Collar Professionals

This class has experts in the medical field, including doctors, surgeons, and nurses. These individuals work in the industry under a medical license but are not covered by the law of a collective bargaining agreement. You will be considered a non-exempt employee if you are a medical practitioner, earning at least $82.72 per hour.

Employees Earning Commissions

You are considered a non-exempt employee if you earn more than half your commission earnings and your totals exceed one and a half times the minimum wage.

Elementary and high school teachers are also considered non-exempt. They earn a salary that is lower than that of licensed teachers. These teachers also earn 70% of the lowest wage offered.

Computer Software Experts

You will be considered an exempt employee if you are a computer software professional working in this field under:

  • System analysis
  • Computer systems
  • Software and hardware designs

The above workers earn a rate of at least $45.41 per hour. However, the following are not exempt from IT professionals:

  • Employees in the manufacturing, repair, and maintenance department of computer hardware
  • Computer-aided design
  • Computer analysis
  • Computer programming
  • Interns
  • Trainees, and
  • Content providers

Most workers are categorized as 1099 independent contractors or as exempt workers. Employers do this to avoid paying their employees overtime. According to California law, signing an agreement that says you are an exempt worker does not exclude you from overtime compensation. Additionally, receiving a salary instead of hourly pay qualifies you for overtime pay.

You are entitled to overtime for services you provide that exceed eight hours per day or 40 hours per week. Your employer must also pay you overtime for your services within the first eight hours worked per week. You have a right to overtime compensation for excess work of 12 hours per day. The law also allows you to pursue overtime compensation if you work for a period that exceeds forty hours per week.

Sometimes, employers enter into unfair agreements with workers about overtime compensation. The agreement often says that a worker can work without overtime if he/she works no more than ten hours per day and within 40 hours per week. This agreement should be ratified by at least two-thirds of the employees involved.

Employers categorize workers as independent contractors or 1099 workers to avoid paying employment taxes and reduce payroll costs. This amount appears small, but it can be significant yearly if all the employees are denied overtime.

Most workers lose overtime compensation by receiving straight-time for the overtime packages instead of hourly rates. Employers often compensate their workers under the Day Rate pay plan. Sadly, this form of payment does not cover weekly overtime hours.

Overtime Compensation

Companies decide the rate of overtime payment for their employees. According to the law, companies’ overtime compensation must be within the two guidelines established under the labor laws. First, you are entitled to overtime of not less than one and a half times your hourly compensation rate. This provision covers workers working within eight hours per day, 40 hours per week, and for six working days of the week.

Second, you are entitled to overtime compensation according to your work hours. Under this provision, your employer must pay you no less than double your hourly rate if you work over 12 hours or more than eight hours per day.

Some employers pressure their workers to work off the clock. They do this intentionally to have their workers work after they clock out without paying overtime. This work includes:

  • Working within rest and lunch breaks
  • Administrative duties
  • Pre-shift work, and
  • Post-shift duties

You are entitled to an hourly overtime compensation rate for any off-the-clock work.

Petitioning A Misclassification

The law allows you to sue your employer against misclassification. You can use the court to enforce your rights as a worker. An experienced employment attorney can help you pursue damages for exploiting your labor rights. The statute of limitations for this lawsuit is within three years of the occurrence of the incident.

The legal channels you can use to pursue your damages include:

Wage or Hour Class Actions

You can join a lawsuit against your employer if you are a victim of an employer’s decision to deny you your deserved compensation. This petition is known as a ‘’class action. You can seek legal aid through a class action to recover your overtime compensation. A class action is vital for employees who cannot afford legal costs alone.

Wage or Hour Lawsuits

Employees are entitled to fair compensation for their work. It violates labor laws for employers to misclassify employment terms to deprive employees of fair compensation. If this happens, you can sue your employer under the wage or hour law. If your lawsuit goes through, your employer can be ordered to pay:

  • Litigation costs inclusive of attorney fees
  • Accrued interest on the amount due
  • Backdated salary and overtime amounts
  • Wage balance you were not paid, and unpaid overtime

Reasons For Suing Your Employer After Being Misclassified As An Independent Contractor

Being misclassified as an independent contractor can deny you many benefits. Some of the benefits you can access upon filing a lawsuit against the employer include:

Tax Benefits

Under Medicare and Social Security taxes, employees are not supposed to pay the whole tax amount. Employees enjoy this tax incentive. You are required to pay half of these taxes while your employer pays the remaining. However, you will not be eligible for this benefit if your employer classifies you as a 1099 independent contractor. This means you will be forced to pay taxes from your pocket.

If an employer has contractual engagements with you, he/she escapes substantial costs. This is the reason why the number of workers classified as independent contractors is on the increase. You should talk to your employer if you are a victim of this action. Tell your employer why you are uncomfortable being classified as an independent contractor. Give the employer time to explain the reasons behind the actions. Consult the IRS if your discussion with your employer fails to yield an appropriate outcome.

Profit Sharing Options

You can enter an agreement with your employer where you share in the company's profits. Your employer can also allow you to buy company stocks. This agreement can assist you in growing your bottom line.

Guarantee To Resume Work After A Medical Leave

The law often protects employees’ medical welfare. California Family Rights Acts (CFRA) and the Family and Medical Leave Act (FMLA) covers workers who go on medical leave. If you are on medical leave, these laws ensure that you return to work after completing your medical leave.

Social Welfare Programs

Both employers and employees contribute to social welfare programs. This arrangement can only happen under an employer-employee agreement.

A Right To The Whistleblower Protections

It is an offense for an employer to fire you for suing or complaining about any violations in the company. You can file a lawsuit against your employer under the whistleblower provision if your employer reprimands you for notifying the authorities. Your employer can also face charges for any attempt to terminate your relationship in response to a complaint against them. The court can impose penalties on your employer for wrongful termination. Whistleblower protections are available for employees but not independent contractors.

Medical Benefits

Workplace medical programs are meant for employees. Some programs are developed to receive funding from the employer and the employee. Unlike programs with one contributor, these medical programs have sufficient funds to clear medical bills. You cannot access medical benefits if classified as an independent contractor. Disabled people are also eligible for medical benefits. The insurance packages provide unemployment benefits and disability benefits.

Access To Workers’ Compensation Insurance

Workers’ compensation insurance covers employees who suffer injuries at the workplace. Insurance companies will meet all the expenses incurred in treating injuries sustained in the workplace. This policy does cover independent contractors. It only covers employees of an entity.

Possible Consequences Your Employer Can Face For Violating Labor Laws

Class actions and wage or hour lawsuits are used to pursue compensation for the lost wages. Your employer can face fines if he/she is guilty of breaking labor laws. The judge can order your employer to pay you depending on the compensation matter you present in court. You can seek redress for overtime and minimum wage violations under Wage or Hour Class Actions. The law also allows you to file a case for intentional misclassification as an independent contractor.

Deliberate misclassification of a worker as an independent contractor attracts a penalty of between $5,000 and $25,000 per violation. The court can order your employer to pay you this amount in full. Your employer cannot deduct any fees or charges that have been deducted.

You have a right to the payment of the money owed if the case before the court involves being denied the whole amount of your minimum wage or overtime. The judge can also order your employer to pay interest accrued on the sums due and attorney's fees.

Sometimes, your employer can decide to fire you for filing a lawsuit against them. If this happens, you can sue your employer for wrongful termination. This will help you seek compensation for the premature termination of your employment.

The Duties Of An Attorney When Seeking A Recovery Of Your Unpaid Wages

Your attorney will ask you to produce some documents to verify specific information once he/she takes over your case. The information will be essential in your lawsuit against your employer. Some of the information that could be required includes:

  • Arbitration agreements
  • Timesheets
  • Employment agreements
  • Pay stubs, and
  • Other pertinent documents

The above information aims to look for a misclassification matter that denied you your rightful overtime if you worked beyond the designated hours. Your attorney will either drop or take up the case after the evaluation. If he/she accepts to represent you, the attorney can do the following:

Serve Your Employer With A Demand Letter

A demand letter notifies your employer of the offense committed. It also shows the amount of money your employer owes you. A demand letter can be an individual notice or for all workers who are victims of an employer's actions.

Mediation

Court proceedings are often unpredictable and can take months or years to be completed. Mediation can be a better solution where your attorney pursues an out-of-court settlement since it enables you to avoid a lengthy trial. During the out-of-court settlement meetings, the events in your lawsuit will help your attorney decide. Most employers also prefer out-of-court settlements to avoid trial rulings.

Carrying Out Discovery

Your attorney will gather necessary evidence to prove your employer's liability in the case. An attorney can achieve this by collecting evidence material to the case, deposing witnesses, and securing essential documents.

Negotiate For A Settlement

Your attorney will discuss with your employer’s attorney whether you prefer an out-of-court settlement or court proceedings. Settling the matter out of court can only work if your employer agrees to pay the agreed-upon amount. If your employer fails to do so, you can take your case to the federal court.

Myths Around Employees And Independent Contractors

Most employers face confusion regarding classifying their staff as employees or independent contractors. The common misconceptions about these two are:

Employees Get To Decide

A worker does not choose to be classified as either an employee or an independent contractor. However, some employers experience this dilemma. For example, an employee might want flexibility and propose an arrangement that permits them to work from home. Some employees can suggest working as independent contractors by setting their own hours. However, a worker should be classified as an employee if the nature of the relationship is that of an employer-employee relationship under applicable tests.

Trial Period Contractor To Employee

Most employers believe hiring a person as an independent contractor for several months as a trial period is okay. If you work well, you are employed as a permanent employee after the trial. This is a violation of labor laws. Classifying a person as an independent contractor has nothing to do with the trial period or time frame. Classification should be based on the application of the appropriate tests, the facts of each case, and the difference in the interpretation of those tests by the administrative agencies and courts.

Find An Experienced Employment Attorney Near Me

A worker can either be classified as an independent contractor or an employee. Misclassification, whether intentional or due to a misunderstanding, is common. Independent contractors work independently and are thus not protected under the California wage and hour laws. Some employers intentionally misclassify workers as independent contractors to avoid paying them overtime or other benefits. If your employer misclassifies you as an independent contractor, an employment attorney can help you pursue a lawsuit against the employer.

Some common factors that indicate employee status include employer supervision over an employee, employer-controlled work schedules, predetermined pay, and others. The indicators of an independent contractor include freedom, offering services outside an employer’s business activities, and payment on a project or contractual basis. If your employer misclassifies you as an independent contractor, contact Stop Unpaid Wages. Call us today at 424-781-8411 to speak to one of our attorneys.