What To Do If Misclassified as Independent Contractor?
Employers need to classify workers correctly, yet sometimes workers are misclassified. This article explains how California employees can deal with and fix the problem of misclassification.
Employers need to classify workers correctly, yet sometimes workers are misclassified. This article explains how California employees can deal with and fix the problem of misclassification.
Example
Normal Z. is an expert landscaper in the Los Angeles area. Norman has worked happily for Sea and Sky Landscaping for over a decade, but is searching for a new job. Sea and Sky classify Norman as an employee, and the company withholds his taxes from his paycheck and conforms to California’s labor laws. As Norman looks for new landscaping gigs, let’s look at the definition of misclassification.
Companies in California can classify their workers in two ways: as employees or independent contractors. This designation involves specific criteria. For workers, being classified correctly helps to determine:
These determinations are vital for employees and employers and hinge on the correct classification. Unfortunately, incorrect worker classifications occur for many different reasons. Therefore, it is essential for employees to be aware of their classification as workers and to make sure that they are correctly labeled.
Often, misclassification occurs when employers consider employees as independent contractors. When this occurs, the misclassified worker can take steps to solve the problem.
Worker Misclassification with Norman Z.
Norman Z. has found a new landscaping company, undergone the interview process, and been hired. His new company, Bark and Mulch Landscaping, is also located in LA, and Norman likes his boss and new coworkers. Plus, the new job features a higher pay rate. Norman believes he has made the right decision.
The first two weeks of training fly by, and Norman enjoys his new gig and getting along with his coworkers. After a few months, Norman realizes he has been so busy that he has not yet taken a clear look at his paycheck. When he does, he notices that some details appear different from his former paystubs at Sea and Sky.
At first, Norman thinks this is because he works for a new company. However, when he looks closer, Norman is surprised: he was hired as an employee, or so he thought. However, Norman, an expert landscaper with many years in the business, has been misclassified as an independent contractor.
What should Norman do, and what are the consequences of his employers’ actions?
What happened to Norman Z. is rare but not abnormal. Employers in California sometimes misclassify their employees to avoid paying taxes, as well as for other reasons. Therefore, it is helpful to examine why these classifications exist first to fully understand the issue of misclassification in California.
Businesses have a choice when classifying workers. They can choose to designate employees as:
This distinction has important ramifications for both employees and employers. First, employers analyze how much control the business has over the union between the two parties. Here are some federal guidelines that dictate why an employer might consider a worker an employee and not a contractor:
There are also state tests that determine employee status. For example, in California, the Employment Determination Guide is useful in helping both employees and businesses figure out the proper worker classification.
Norman Z.’s Employment Misclassification
In Norman’s case, his research tells him that Bark and Mulch wrongly classified him. Norman does not arrive at this answer frivolously. He spends time online and schedules a consultation with a local law employment attorney. Here is what he finds out:
The question of whether Norman’s work makes him an essential part of the business is more subjective and a bit tricky. However, since Bark and Mulch is a small outfit with only six workers, Norman is certain that he is a vital part of the business. Norman is also the most experienced landscaper on the team. Since the start, he has been leading each worker through each project.
Based on his findings, Norman believes Bark and Mulch misclassified him. He plans to consult with his lawyer again, but he also wonders: what are the main differences between employees and independent contractors?
Comparing independent contractors to employees yields several specific differences. First, independent contractors are their bosses. Employees, on the other hand, work for their employers.
Second, the relationship between a worker and an employer differs from that between an independent contractor and an employer. Businesses withhold taxes from wages paid out to employees. When companies pay independent contractors, they do not withhold taxes.
Third, California’s employment and labor laws do not apply to independent contractors.
Norman Z’s Journey Continues
For Norman Z., the details of his paycheck tipped him off that he may have been misclassified. Normal notices that his employer was not withholding his taxes at Bark and Mulch. As Norman considered his options, he grappled with another question: why would his employer misclassify Norman as an independent contractor?
There are various reasons why businesses misclassify their employers. However, often this wrongful action is intended to avoid paying taxes.
Additionally, some companies refuse to comply with California’s labor laws. Others do not wish to spend the money to provide benefits to workers.
For employers, contractors are an easier, more inexpensive option as opposed to employees. Why? Legally, businesses are not required to offer independent contractors:
Plus, employers are not considered liable when independent contractors suffer injuries on the job. For example, suppose Norman Z. is an independent contractor and accidentally cuts his hand with some hedge clippers at the end of the day. In that case, Bark and Mulch are not liable for his injury or the expenses it may bring.
It is an egregious error when businesses misclassify their employees as independent contractors. Norman Z. did the right thing when he discovered that his new company misclassified them. Norman conducted some research himself and then contacted a misclassification attorney.
Norman Z. learned an essential truth based on his experience: that workers in California have rights.
When a company misclassifies a worker as an independent contractor, the employer’s actions are unlawful. The employer is taking advantage of its workers and must rectify the situation.
Norman’s employment attorney informs him that Bark and Mulch may owe him money for:
These financial losses depend on the worker’s responsibilities, pay rate, and work arrangements with the employer.
Norman Z.’s research was helpful, but it was even more vital to his case to contact a qualified, experienced attorney. Some misclassification cases in California are very complex and require a trial to resolve. In some cases, workers can file a claim against the company and pursue monetary damages. Each case is different, and a skilled employment lawyer will know how to navigate the nuances of a specific case.
While working on Norman Z.’s case, his attorney dealt with claims with California’s labor agencies and the Federal Department of Labor. Since Norman’s lawyer had handled many misclassification cases before, she could figure out which organizations to contact to find justice for Norman and provide him with his deserved compensation.
When an employee who has been misclassified contacts a lawyer, they can seek out the money owed. Some attorneys will file a successful wage claim, and their clients will be satisfied. Other times, claimants will need to appear in court.
Pursuing a lawsuit against the business is viable if the employee has multiple claims.
Norman Z.’s Rightful Resolution
For example, when Norman Z. informed Bark and Mulch that he noticed he was misclassified, Bark and Mulch promptly fired Norman. However, when he brought this information to his attorney, she told Norman that it was in his best interest to sue Bark and Mulch for misclassification and wrongful termination. At first, Normal was surprised, but after his lawyer went over the details with him, he agreed.
Norman Z.’s lawsuit was successful, and he received the appropriate monetary settlement. Norman is now back at his old company Sea and Sky. He is happy to be considered an employee of Sea and Sky. Norman has even received a promotion for his efforts.
Each misclassification case is different, and Norman’s situation is unique. Workers in California must understand their rights regarding misclassification and other employer offenses.
Learn more about: Business | Corporate | Employment
See all articles: Business | Corporate | Employment
See all articles: Business | Corporate | Employment