This is a prevalent problem.  Misclassification of a worker occurs when an employer improperly classifies its employees as an independent contractor in order to avoid paying payroll taxes, minimum wage or overtime, complying with other wage and hour law requirements (like meal breaks and rest breaks), and maintaining workers’ compensation insurance.

Classifying a worker in California as an independent contractor has always been difficult.  However, recently, the California Supreme Court issued a ruling and the California legislature followed by enacting a law that makes it even more difficult for an employer to classify a worker as an independent contractor.  This was done to protect workers’ rights and to prevent employers from skating by their legal obligations.  On April 30, 2018, the California Supreme Court, in a case called “Dynamex” issued a three-part test (“the ABC test”) to analyze whether a worker qualifies as an independent contractor.  The State of California enacted a law effective January 1, 2020 (Assembly Bill 5) that was based upon the Dynamex decision.  The employer must prove all three factors in order to succeed on a misclassification claim.  The three factors are:

  • the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fac
  • the worker performs work that is outside the usual course of the hiring entity’s business
  • the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

The second factor is difficult for the employer to prove.  For instance, a nail salon that employs nail technicians may not classify them as independent contractors because the nail technicians perform work that is within the usual course of the business (a nail salon). 

There are some occupations and industries that are not subject to the ABC test (i.e., certain licensed insurance agents and brokers, physicians, dentists, attorneys, private investigators, accountants, to name a few).  If you are being paid by your employer as an independent contractor, there is a strong chance that you are being denied various rights and we recommend you consult an experienced labor and employment attorney to evaluate your rights.