Employee Misclassification

Employee misclassification happens when a business labels workers in a way that strips them of legal protections. The most common version is calling someone an independent contractor when they are really an employee. Another is classifying an employee as "exempt" from overtime when their duties or pay do not meet the legal test.

The label a company uses does not decide the question; the facts of the working relationship do. The IRS looks at three categories of evidence: behavioral control, financial control, and the relationship of the parties. Under the Fair Labor Standards Act, courts look at the economic reality of whether the worker is in business for themselves. California uses a stricter "ABC test," under Labor Code 2775, which presumes a worker is an employee unless the business proves the worker is free from its control, does work outside the usual course of its business, and is customarily engaged in an independent trade.

Misclassified workers can lose minimum wage, overtime, expense reimbursement, meal and rest breaks, unemployment and workers' compensation coverage, and the employer's share of payroll taxes. That makes misclassification a common basis for class and collective actions, including cases against delivery companies, trucking firms, and gig platforms. Many workers face arbitration clauses that push claims into individual proceedings.

Keep records of your schedule, who set it, who supplied your tools, and your pay. Our pages on independent contractor misclassification, unpaid overtime, and trucker unpaid wages explain current claims.