Overview
Employee misclassification is one of the most widespread wage violations in California. Many workers are labeled as independent contractors or exempt employees when they should be treated as hourly, nonexempt employees who are entitled to overtime, meal and rest breaks, and numerous protections under California law. Misclassification allows employers to avoid paying full wages, benefits, and taxes, which is illegal.
If you believe your employer has misclassified your position or used an improper pay structure, you may be owed significant compensation. This page explains how misclassification works, the financial harm it causes, and how a California employment attorney can help you recover unpaid wages and penalties.
Independent Contractor vs Employee
California uses the ABC Test to determine if a worker should be classified as an employee instead of an independent contractor. Under this test, a worker is presumed to be an employee unless the employer can prove all three of the following:
A. The worker is free from the control and direction of the hiring entity
This refers to control over how, when, and where the work is performed. If the company sets schedules, supervises tasks, or requires compliance with internal policies, the worker is likely an employee.
B. The worker performs work outside the usual course of the hiring entity’s business
If you perform work that is essential to the company’s primary business, you are typically an employee. For example, a dental assistant working in a dental office cannot be classified as an independent contractor because their work is central to the business.
C. The worker is customarily engaged in an independently established trade
This means the worker has their own business, marketing, clients, or professional services offered beyond the hiring company.
If the employer fails any part of the ABC Test, the worker must be classified as an employee.
Exempt vs Nonexempt Misclassification
Employers often classify employees as exempt to avoid paying overtime. For an employee to be properly classified as exempt, two conditions must be met:
1. Salary Requirement
The employee must be paid a salary that meets the state’s minimum threshold. Hourly workers cannot be exempt.
2. Duties Requirement
The employee’s primary duties must be executive, administrative, or professional in nature. The employee must regularly exercise independent judgment and perform high level responsibilities.
Employees mislabeled as exempt often perform mostly nonexempt tasks such as:
- Customer service
- Manual labor
- Routine administrative work
- Production tasks
- Data entry
If most of your daily tasks do not involve managerial or professional decision making, you may have been misclassified.
Commission Based and Piece Rate Pay Schemes
Improper pay structures are another common way wage theft occurs. Employers sometimes use commission based or piece rate pay systems without following California’s strict rules.
Commission Pay
Employers must still pay overtime when employees earn commissions. Many companies fail to calculate overtime correctly for employees who receive:
- Sales commissions
- Production bonuses
- Performance based pay
Piece Rate Pay
Piece rate workers must be paid separately for:
- Rest breaks
- Nonproductive time
- Downtime
- Travel between locations
Failure to do so violates California labor law.
Red Flags That Suggest Misclassification
You may have been misclassified if any of the following apply:
- You work full time for one employer
- You follow the company’s schedule
- You use company tools, equipment, or uniforms
- You do not control your own pricing or clients
- You are required to attend meetings or training
- You clock in and out
- You are paid a flat salary regardless of overtime worked
- You perform mostly routine tasks
- You travel between job sites without pay
- You are not given meal and rest breaks
- You receive 1099s instead of W2s
- You are required to sign an independent contractor agreement
The label or contract you signed does not determine your classification. California looks at the reality of your job duties and level of control.
How Misclassification Harms Employees
Misclassification causes significant financial loss and removes important employee protections. Employees lose:
- Overtime pay
- Meal and rest break premiums
- Minimum wage protections
- Reimbursement for business expenses
- Workers compensation benefits
- Paid sick leave
- Unemployment insurance
- Employer contributions to taxes
- Health and retirement benefits
Many employees lose tens of thousands of dollars due to improper classification.
How to Prove a Misclassification Case
Strong misclassification cases rely on evidence that shows the employer controlled your work or denied required wages. Useful evidence includes:
1. Work Schedules
These show that the company controlled your hours.
2. Emails or Messages
Any communication directing your work or requiring specific tasks.
3. Task Lists or Job Duties
These help prove you performed mostly nonexempt work.
4. Time Records
Clock in and clock out records show you were treated like an employee.
5. Pay Stubs and 1099 Forms
These confirm how you were paid.
6. Company Policies
Handbooks often contradict the contractor label by imposing employee style rules.
7. Witnesses
Coworkers can confirm the level of control the company exercised.
An attorney can analyze your documentation to build a compelling case.
Compensation You Can Recover for Misclassification
Misclassification claims often result in significant financial recovery. You may be entitled to:
1. Unpaid Overtime
Overtime that was never paid due to exempt or contractor mislabeling.
2. Unpaid Minimum Wage
If your pay structure caused you to earn below minimum wage.
3. Meal and Rest Break Premiums
One additional hour of pay for each day a meal or rest break was not provided.
4. Reimbursement for Business Expenses
Mileage, tools, equipment, uniforms, phones, and more.
5. Waiting Time Penalties
Up to 30 days of wages if your employer failed to pay all wages at separation.
6. Wage Statement Penalties
For inaccurate or incomplete pay stubs.
7. Interest and Liquidated Damages
Under California law, employees often recover additional financial penalties.
8. Attorney Fees
In many cases, the employer must cover your legal fees.
Because misclassification often overlaps with other wage violations, settlements can reach very high amounts.
How an Employment Lawyer Helps You
A worker misclassification attorney can:
- Evaluate your job duties and pay structure
- Apply the ABC Test or duties test
- Review time and pay records
- Identify every wage and hour violation
- Gather documentation and witness statements
- File claims with the Labor Commissioner or in civil court
- Negotiate aggressively for a fair settlement
- Represent you in litigation if necessary
Employers often fight these cases, so having experienced legal representation is essential.
What to Do if You Suspect Misclassification
If you believe you were misclassified, take the following steps:
- Save pay stubs and time records
- Keep copies of your job duties and schedules
- Do not confront management aggressively
- Do not sign any new agreements without review
- Keep a personal timeline of events
- Contact an employment lawyer as early as possible
You have a limited time to file claims, so early action protects your rights.
Speak With a California Employee Misclassification Lawyer
If you were misclassified as an independent contractor or exempt employee, you may be owed overtime, missed break premiums, business expense reimbursement, and significant penalties. A skilled employment attorney can analyze your situation, enforce your rights, and help you recover every dollar that the law allows.
