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What is misclassification and why does it matter?

On Behalf of | Apr 2, 2021 | Workplace Discrimination |

Misclassification is a form of fraud that occurs when an employer purposefully and improperly classifies their workers as independent contractors instead of employees. By misclassifying them, employers are able to deny their workers fair wages and benefits, as many state and federal employment laws do not extend to provide protection for independent contractors.

For example, a misclassified worker might be paid less than the minimum wage and denied overtime pay. A misclassified worker would also not be able to join a union, have the right to family leave, enjoy regular breaks, or be covered under workers compensation and unemployment insurance.

Independent Contractor or Employee?

In the state of California, the starting presumption is that workers are employees. A worker will only be considered an independent contractor if the employer can establish that:

  • the worker is free from significant control and direction of the employer
  • the worker performs work that is not central to the employer’s business
  • the worker operates and engages in an independent trade or business in the same industry as the work they were hired to perform

The plumber who is regularly hired by a retail store, for example, would likely be considered an independent contractor because the plumber would be free to fix the pipes in whatever way he saw fit. Moreover, plumbing is not central or directly relevant to operating a retail business and the plumber would likely maintain his own plumbing business or be employed by an independent plumbing company.

How can a misclassified employee recover lost wages?

A misclassified employee may be able to recover lost wages either by filing a wage claim or bringing a lawsuit in court. California employees can file a wage claim with the Labor Commissioner’s Office, though the advice of an experienced labor attorney can be vital for those navigating the legal process and seeking the compensation they already earned.