What is employee misclassification in California?

Navigating California’s employment landscape requires understanding labor laws that are important for employees. One issue that has risen to prominence in recent years is employee misclassification.

A study by the University of California, Berkley found that between 10 and 30% of employers misclassify workers in the United States. Misclassification is a serious issue, and it is important that workers understand what it is and how it can affect them.

Rights and benefits

Classifying a worker as an independent contractor typically excludes them from the benefits and protections that employees enjoy. For example, California guarantees employees minimum wage, overtime pay, rest breaks and certain benefits like health insurance. Independent contractors don’t receive these guarantees. This disparity sometimes tempts employers to misclassify employees to cut costs.

Correct classification

California employs specific tests to decide if a worker should be an independent contractor or an employee. One notable method is the “ABC test,” which employers must use to categorize a worker as an independent contractor. To classify a worker as an independent contractor using this test, an employer must show:

1. The company does not control or direct the worker’s tasks.
2. The worker carries out tasks outside of the company’s main business functions.
3. The worker usually pursues an established trade, occupation or business similar to the work they do for the company.

If an employer can’t meet any part of this test, they should classify the worker as an employee.

Importance of proper classification

Misclassifying employees can result in substantial penalties for employers, like large fines and owed back pay for benefits. For workers, misclassification can mean they lose essential benefits and protections they deserve.

Knowing your rights and understanding your employment status under the law will equip you to seek fair treatment in your workplace.