Employee Misclassification

A job title or contract label does not decide whether you are owed overtime. When employers misclassify workers as independent contractors or exempt salaried employees, they avoid overtime, breaks, and expense reimbursement. A misclassification lawyer can recover what you were denied.

Smith Trial Group represents misclassified workers throughout Southern California, individually and through class actions and PAGA claims. We work on contingency.

On this page: Independent contractors · Exempt employees · What you may be owed · Deadlines · FAQ

Independent Contractor Misclassification

In California, workers are presumed to be employees. Under the “ABC test,” a company can treat a worker as an independent contractor only if it proves all three of the following:

1. A: the worker is free from the company’s control and direction in performing the work;
2. B: the work is outside the usual course of the company’s business; and
3. C: the worker is customarily engaged in an independently established trade or business of the same kind.

Delivery drivers, installers, cleaners, warehouse staff, and many others are frequently misclassified. Some occupations have specific exemptions, and app-based rideshare and delivery drivers are governed by separate rules, so each situation requires a careful look.

Exempt Employee Misclassification

Many salaried employees are labeled “exempt” from overtime when they should not be. To be exempt under the executive, administrative, or professional exemptions, an employee generally must:

• Earn a salary of at least twice the state minimum wage for full-time work; and
• Spend more than half of their working time on genuinely exempt duties, exercising discretion and independent judgment.

Assistant managers, coordinators, analysts, and inside sales staff are common examples of employees who may be misclassified.

What Misclassified Workers May Be Owed

• Unpaid overtime and double time
• Premium pay for missed meal and rest breaks
• Reimbursement of business expenses such as mileage, vehicle costs, and phone use
• Penalties for inaccurate wage statements and late final pay
• Civil penalties for willful misclassification, often pursued through PAGA
• Attorney’s fees and costs

Deadlines

Wage claims can generally reach back three years, and in some cases four. Every month of delay can mean lost wages that can no longer be recovered.

Helpful resources: California Labor & Workforce Development Agency: Employment Status · California Labor Commissioner

The ABC Test

For most California wage and hour purposes, a worker is presumed to be an employee unless the hiring business proves all three parts of the “ABC test” codified in Labor Code 2775:

1. A: the worker is free from the hiring business’s control and direction in performing the work, both under the contract and in fact;
2. B: the work is outside the usual course of the hiring business’s operations; and
3. C: the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

Some occupations and business relationships are exempt from the ABC test and are evaluated under the older multi-factor Borello test instead. A contract that calls you an independent contractor does not decide the question.

Where Misclassification Is Common

• Delivery, trucking and port drayage drivers.
• Construction trades and subcontracted labor.
• Healthcare staffing, home care and medical billing.
• Technology, design and marketing “contractors” who work like employees.
• Sales representatives paid only on commission.
• Salaried employees labeled “exempt” who mostly perform non-exempt duties, such as assistant managers and office staff.

Business Expenses and Other Benefits

Misclassified workers often pay business expenses that an employer must reimburse under Labor Code 2802, such as vehicle mileage, phone and equipment costs. They may also be denied paid sick leave, workers’ compensation coverage, unemployment insurance and employer payroll tax contributions. California law also imposes civil penalties on employers that willfully misclassify workers. See expense reimbursement.

Retaliation for Raising Misclassification

It is illegal to retaliate against a worker for asking about classification, complaining about unpaid overtime or filing a claim with the Labor Commissioner. If your hours were cut or your contract ended after you raised concerns, you may have an additional retaliation claim. See workplace retaliation.

Frequently Asked Questions

I signed an independent contractor agreement. Does that settle it?

No. A contract label does not control. What matters is how the work is actually performed under the ABC test.

Will I owe taxes if I was misclassified?

Misclassification often shifts tax burdens onto workers. A tax professional can advise on that issue, and correcting your status can help going forward.

Related guides: Do salaried employees get overtime? · Expense reimbursement