If you’re an employee in California who has been misclassified, you could be dealing with monetary losses, missing out on important benefits, and experiencing other challenges. If you’ve been misclassified or retaliated against for confronting your employer about your misclassification, you may have grounds for a claim.
A California employee misclassification lawyer from Domb & Rauchwerger can review the details of your situation and determine if you’re eligible to pursue damages from your employer. Schedule a free consultation with our team today to learn more about your legal options.
Two Types of Employee Misclassification
As an employee, there are two ways that you can be misclassified, both of which come with serious financial setbacks that should be compensated. The first type of misclassification occurs when you’re classified as an independent contractor when you should be classified as an employee.
The second form of misclassification occurs when you’re classified as an exempt employee when you should be classified as a non-exempt employee. If you suspect that you’re wrongly classified, a California employee misclassification attorney from our firm can offer guidance.
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Employees and Independent Contractors
There are several key differences between properly classified employees and independent contractors. Since having an independent contractor is generally less of a financial investment than having an employee, employers will sometimes misclassify individuals as independent contractors.
An employer may misclassify you as an independent contractor because then they won’t have to:
- Pay payroll taxes
- Provide you with workers’ compensation insurance
- Pay you minimum or overtime wages
- Reimburse you for necessary business expenses
- Provide you with meal and rest breaks
- Provide you with paid sick leave
- Provide you with accurate and itemized wage statements
As you can see, your employer has a lot to benefit from misclassifying you as an independent contractor, and you have a lot to lose by being misclassified. If you believe you’re missing out on the benefits of being classified as an employee, it’s in your best interest to reach out to an employee misclassification lawyer from California to confirm or deny your suspicions.
There is a presumption in California that a worker should be classified as an employee and not an independent contractor. In order to be classified as an independent contractor, the individual must meet what is referred to as the ABC test.
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An Individual Can Be Classified As an Independent Contractor If They Meet the ABC Test
Assembly Bill (AB) 5 requires employers in California to use the ABC test to determine if you should be classified as an independent contractor. The requirements outlined in the ABC test can help you figure out if you’re misclassified as an independent contractor.
The ABC test is made up of three questions, all of which must be answered in the affirmative for an employer to properly classify a worker as an independent contractor. The questions are as follows:
- Is the individual free from the control and direction of the company/employer when the individual is performing their work?
- Is the individual performing work that is outside the usual course of the company’s business?
- Is the individual customarily engaged in an independently established trade of the same nature as the work the individual is performing?
Upon first glance, the ABC test might seem confusing, and you could be uncertain whether or not, based on the circumstances of your employment, you would answer “yes” or “no” to the three questions. Fortunately, the California employee misclassification lawyers from Domb & Rauchwerger are here to break down each of the three questions that make up the ABC test.
Understanding Part A
To answer “yes” to part A (“Is the individual free from the control and direction of the company/employer when the individual is performing work?”), you must be free to choose how you want to accomplish a project, the hours you work, the tools you use, etc. It’s probably clear whether or not you’d answer “yes” to part A, as it’s fairly straightforward. That said, the following parts may require more explanation.
Understanding Part B
To satisfy part B (“the individual performing work that is outside the usual course of the company’s business?”), you cannot be engaged in the same line of work as the company for whom you are performing services. For example, if you are a plumber and a grocery store hires you to fix a leak in the bathroom, you are not performing work that the grocery store as a business generally performs, which means you do not satisfy part B.
On the other hand, if you are a meat clerk at a grocery store, you’re in the same line of work that the grocery store is generally involved in, so you would answer “no” to Part B of the test. In this situation, if the grocery store attempted to classify you as an independent contractor, it would be a misclassification and illegal.
Similarly, let’s say there is a company that makes and sells widgets and they hire an independent contractor to sell their widgets to other companies. In such a situation, this would very likely be a misclassification because both the company and the individual are involved in the sale of widgets.
Understanding Part C
Part C of the test (“Is the individual customarily engaged in an independently established trade of the same nature as the work the individual is performing?”) focuses on whether you hold yourself out as an independently established business. Using the grocery store example, imagine again that you’re a janitor who only provides cleaning services to the grocery store.
In this hypothetical situation, you don’t perform janitorial work for others and don’t advertise yourself as being available to provide janitorial work for others. In this scenario, you would answer “no” to part C of the test. As a result, you would have to be classified as an employee of the grocery store, even if you answered “yes” to part B.
On the other hand, if you provide your janitorial services to many different companies and/or if you hold yourself out as available for hire to different companies, you would likely answer “yes” to part C of the test.
What Your Answers to the ABC Test Mean
If you answer “no” to any of the ABC test questions, you should probably be classified as an employee. You likely should be classified as an independent contractor if you answered “yes” to all three questions.
If you realize that your ABC test result doesn’t match your current classification, we encourage you to meet with an employee misclassification attorney from California, as you may be entitled to remedies, such as compensation and penalties. However, you might not have grounds for a claim if one of the exceptions mentioned below applies to your situation.
ABC Test Exceptions
The California legislature created several exceptions for certain industries where a company does not have to meet the ABC test’s requirements in order to properly classify an individual as an independent contractor.
For those industries/professions exempted, a different and less rigid test applies. The industries/professions that are exempt from the ABC test include, but are not limited to:
- Business-to-business contracting
- Professional services such as marketing, graphic design, writing, tax advice, photography, videography, editing, freelance journalism, publishing, and salon services
- Appraisals
- Forestry
- Fine art
- Sale of travel
- Human resources
- Creating sound records/musical compositions
- Real estate licensees
- Home inspectors
- Contractor/subcontractor relationships
- Data aggregators
- Licensed insurance agents
- Certain healthcare providers
- Professionals licensed by the state of California
- Investment advisors
- Direct salespersons
- Commercial fisherman
- Newspaper distributors
Each of these exceptions has their own unique requirements, so it is important that you speak with our California employee misclassification attorneys if you believe that you have not been properly classified as an independent contractor by an entity.
Employers and Individuals Can’t Contract Around ABC Test Results
According to the law, you and a company cannot contract around the classification determined by the ABC test.
In other words, even if you want to be classified as an independent contractor or sign an agreement stating that you are an independent contractor, you still must be classified as an employee unless you pass the ABC test or fall into one of the exceptions listed above.
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Exempt and Non-Exempt Employees
Assuming you’ve been properly classified as an employee, the next question is whether you are a non-exempt employee or if you can be properly classified as an exempt employee. If you’re an exempt employee, you’re exempt from certain benefits provided by California Law, such as meal breaks, rest breaks, and overtime.
If you’re a “non-exempt” employee, then California law affords you the breaks and overtime that exempt employees don’t receive. Employees are automatically considered non-exempt, meaning California’s labor law protections apply to them, unless they fall within a particular exemption.
Many employees mistakenly think that if they are paid a salary, they are automatically exempt and not entitled to overtime pay, meal periods, or rest breaks, but that’s not necessarily the case.
The test used to determine whether an employee is exempt is complicated, so working with a skilled employee misclassification lawyer from our team in California is crucial to determining your employment status.
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The Executive, Professional, and Administrative Exemptions
While there are several exemptions, the most common three are known as the executive, professional, and administrative exemptions. In order for you to be considered exempt under one of these exemptions, you must satisfy both a “duties test” and a “salary test.”
Duties Test
To satisfy the duties test, you must be primarily engaged (i.e., spend more than 50% of your time) in performing duties related to the specific exemption (discussed below).
You must also customarily and regularly exercise discretion and independent judgment in performing those duties.
Salary Test
To satisfy the salary test, you must receive a salary equivalent to at least two times the state minimum wage. Effective January 1, 2023, the state minimum wage for all employers became $15.50. In other words, you must receive a salary of at least $64,480 per year to satisfy the test.
Requirements for the Executive Exemption
To be considered exempt under the executive exemption, you must, among other things:
- Have duties or responsibilities that involve the management of the company (or a department or subdivision thereof)
- Manage and direct the work of at least two other employees; and
- Have the ability to hire or fire, or at least have your recommendation to hire or fire given serious weight.
You must be involved in the above-mentioned managerial duties for more than 50% of your time to meet the exemption.
Requirements for Professional Exemption
To qualify under the professional exemption, you must be licensed or certified with the State of California and be primarily engaged in (i.e., spend more than 50% of your time) a specific profession, such as:
- Medicine (not including registered nurses)
- Dentistry
- Optometry
- Law
- Accounting
- Teaching
- Engineering
- Architecture
- Or an occupation commonly recognized as a learned or artistic profession
Even if you are not licensed in California in your profession, you may still be exempt based on your classification as a learned or artistic professional. To be considered a learned or artistic professional, you must have advanced knowledge in a field that typically requires prolonged, specialized instruction and study as opposed to general academic knowledge.
You may also qualify for the professional exemption if you work in a profession that is creative in nature and in a recognized field of artistic endeavor that relies on invention, talent, or imagination. Understanding the requirements for professional exemption can be difficult. Consult with our California employee misclassification lawyers to find out if you’re exempt.
Requirements for Administrative Exemption
To qualify under the administrative exemption, you must be primarily engaged in duties that relate to the management policies or general business operations of your employer as opposed to the line of work that the employer is in. A person whose job qualifies for the administrative exemption usually assists a proprietor or executive in the operations of the business.
For example, if you’re involved in human resources at a grocery store, you may qualify for the administrative exemption because the grocery store is not in the business of human resources. As a human resources employee, you’re providing a behind-the-scenes or administrative role to the company and may qualify for the exemption.
The Outside Sales Exemption
Another somewhat common exemption is the outside sales exemption, which may apply to you if you spend more than 50% of your time engaged in sales activities outside the office.
Unlike the professional, executive, and administrative exemptions, there is no salary requirement for this exemption, as an outside salesperson is exempt from overtime, meal break, rest break, and minimum wage requirements.
This exemption is more difficult to meet than many think because working at home does not count as working “outside the office.” That means if you work from home and spend 75% of your time at home making sales calls, you likely will not qualify for this exemption.
Sales Activities Time Requirement for Outside Sales Exemption
To qualify for this exemption, you must be in the field engaged in sales activities over 50% of your time at work. You must also be engaged in actual sales activity in order for that time to count towards the requirement.
For example, if you drive and deliver products to customers and happen to get an occasional sale once every few weeks, you would not be engaged in sales activity when driving to customers each day. On the other hand, if you drive to a customer specifically to make an in-person sales pitch, the entire drive and pitch time is considered a sales activity.
A fact-intensive analysis is required to determine whether you are properly classified as an outside salesperson. Figuring out if you’re classified as an outside salesperson can be tricky and time-consuming. Fortunately, our team of employee misclassification lawyers from California can help you with the process.
Additional Exemptions
While the main exemptions are covered above, other industries and professions have additional exemptions. If your exemption isn’t listed above and you believe you’ve been misclassified, contact a California employee misclassification attorney to find out if you can hold your employer liable for damages.
Financial Remedies an Employee Misclassification Lawyer Can Pursue
If you have been misclassified as an independent contractor or exempt employee, you could be entitled to significant compensation for a number of different losses. An attorney from our firm may be able to obtain several or more of the following financial remedies on your behalf:
- Overtime payments
- Premium payments for missing meals and rest breaks
- Minimum wage payments
- Reimbursement for reasonable business expenses
- Back pay
- Compensation for emotional distress
- Punitive damages
If you believe that you have been misclassified, either as an independent contractor or as an exempt employee, or if you believe that you have been retaliated against for bringing up to your employer that you believe you should be receiving overtime, meal periods or rest periods, please contact our office immediately for a free consultation.
An Attorney Can Help You Take Action Against Retaliation
If your employer has retaliated against you for bringing up your misclassification, Domb & Rauchwerger can help you hold them accountable for their actions. Get in touch with our team if your employer has taken any of the following actions against you because you confronted them about your misclassification:
- Demoted or fired you
- Lowered your pay
- Relieve you of certain duties
- Took away certain benefits
- Verbally abused or harassed you
- Gave you a negative performance review
Our Firm Has the Experience Required to Deliver Justice
Before joining forces, attorneys Zack Domb and Devin Rauchwerger were partners at one of the largest employment defense firms in the U.S. At their previous firm, Domb & Rauchwerger represented Fortune 500 employers and learned all of the strategies that employment defense attorneys use against employee misclassification claims.
Domb & Rauchwerger is different from other firms because it can offer the insider perspective and experience that’s crucial in going up against your employer’s legal team and winning. The firm is also unique because Zack Domb and Devin Rauchwerger work together on every case they take on.
That means you’ll have access to two highly skilled employee misclassification attorneys who both bring a valuable approach to the table. Together, Zack Domb and Devin Rauchwerger have what it takes to aggressively pursue remedies on your behalf and patiently guide you through the legal process.
Schedule a Free Consultation With an Employee Misclassification Attorney
No one should suffer financial losses and other setbacks due to misclassification. If you believe your employer has misclassified you, contact a California employee misclassification lawyer from Domb & Rauchwerger today.
We’ll meet with you via a free, no-obligation consultation to discuss your situation and explore your legal options. If we think you’re entitled to remedies, we’ll get started on your case as soon as we can. We look forward to hearing from you soon.
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