Improperly Classified Independent Contractors and Workers’ Compensation

Sometimes the line between who is considered an employee and who is an independent contractor gets blurred. Many companies prefer to classify workers as independent contractors to avoid paying for workers’ benefits and insurance. Failing to properly classify workers, however, can come with severe consequences. Popular questions about worker classification and injury claims include:

What Do I Do if I am Improperly Classified as an Independent Contractor and I get hurt?

There is not a specific description for an independent contractor, making them very hard to define. Instead, court interpretation and law enforcement decide who is really an independent contractor when injury and other claims arise. Generally speaking, an employee is a worker who:

• Is behaviorally controlled by the company. Any worker who follows company protocols for when and where to work, how to work, or who the worker can collaborate with may be considered an employee. Workers trained or evaluated on performance may also be considered employees.

• Relies on the company for financial considerations. A company that supplies tools, equipment, and other requirements for a job likely has employees, not independent contractors.

• Considers his or her work source a client, not an employer. An independent contractor will not receive benefits but will work according to a predetermined contract. He or she typically also provides services that are not a key part of the business.

If you have been injured and are concerned that you may have been misclassified, contact an attorney as soon as possible. With a quick, initial conversation, you may be able to determine whether you are truly an independent contractor or if you should be eligible for employee benefits like workers’ compensation.

Why Would My Employer Misclassify Me?

Occasionally, an employer will misclassify workers on accident. He or she may be new and naïve about state laws regarding employee classification. However, many claims against employers are based on “willful” misclassification. If an employer should have reasonably been able to classify you as an employee and failed to do so, he or she is in conflict with the current laws in California and may be subject to strict penalties.

An employer who willingly misclassifies an employee may be trying to cut corners and keep more profit away from workers. By having independent contractors rather than employees, a company can avoid paying certain taxes and labor costs. Companies that utilize independent contractors do not have to pay social security or unemployment insurance to independent contractors. It also frees employers from paying a minimum wage or following equal employment opportunity regulations.

What Penalties Are Involved? Which Laws Govern Them?

California has stiff penalties for any companies that misclassify their workers. Under Senate Bill 459, the state’s Labor and Workforce Development agency can fine employers for willfully misclassifying individuals $5,000-$15,000 for each violation. For any proven pattern of misclassification, the penalty may be increased to $25,000 for each violation. Any employer who is guilty of misclassification cannot deduct fees or other payments after a contractor has been reclassified.

Can I File a Claim if I Have Been Improperly Classified? How?

Yes, you can still file a claim if you have been improperly classified. First, you will need to challenge your status as an improperly classified worker. Under California law, you will need to file a wage and hour claim against the employer with the Division of Labor Standards Enforcement to recover lost payments and determine your true employment status.

You may want to consult an attorney for this process. The claim will be evaluated by the Deputy Labor Commissioner who will make a judgment call for proceeding with the case. Once your status as an employee has been determined, your attorney can help you complete the next steps in securing compensation in an injury claim.