If you’re like many people, you know that salary misclassification is a serious problem in California – and that it often results in employees being paid less than they deserve, being denied worker protections, and losing certain labor rights. But what can you do if you’re a misclassified employee in California? This guide explains.
What Can You Do if You’re a Misclassified Employee in California?
First things first: You have to understand the difference between an employee and a contractor to ensure that you’re a misclassified employee. The table below outlines the differences between employees and contractors.
|Can work for more than one company at a time||Typically only works for one employer|
|Sets own hours||Works at times and for durations set by the employer|
|Works from any location||Generally works in the employer’s place of business|
|Does not receive employment benefits, such as health insurance, sick pay or overtime pay||Is eligible for employment benefits, such as health insurance, sick pay and overtime pay|
|Works independently often or most of the time||Works under the employer’s control|
|Can perform tasks in any manner, without the employer’s input or direction||Is subject to the employer’s guidelines on performing tasks|
|Bears costs associated with performing the job||Does not incur costs or make personal investments associated with performing the job|
|Pays own taxes; employer does not withhold taxes||Employer withholds taxes and provides employee with a net salary|
|Cannot claim unemployment compensation benefits||Is generally eligible for unemployment compensation benefits if terminated or laid off|
|Cannot claim worker’s compensation benefits||Can claim worker’s compensation benefits|
|Can be “let go” without reason or notice||Can usually only be terminated for good cause and with notice, unless employment is of another nature|
|Receives pay according to a contract’s terms and conditions||Receives at least federal or state minimum wage, and is covered by employment laws like overtime pay|
|Is not typically protected by employment laws involving discrimination or workplace safety||Is protected by employment laws involving discrimination and workplace safety laws|
If you fit the description of an employee but your employer considers you a contractor, you may have legal recourse. This guide explains what you can do if you’ve been misclassified, including:
- Resolving the issue on your own
- Contacting the Internal Revenue Service
- Seeking uncollected taxes
- Filing a wage claim
- Contacting an attorney
Here’s a closer look at each.
Resolving Misclassification Issues on Your Own
Sometimes salary misclassification is a simple mistake. Your employer may not know – or fully appreciate – the differences between contractors and employees. However, sometimes it’s not a mistake and an employer willfully misclassifies an employee in an effort to save money or avoid paying taxes. If you’re not sure, you may want to try to resolve the issue on your own; even if it doesn’t result in a change in your classification, you’ll have a response from your employer that will enable you to decide which steps to take next.
Contacting the IRS About Salary Misclassification
You can ask the Internal Revenue Service to determine your employment status for federal tax purposes. You can do that by filing IRS Form SS-8, which prompts the IRS to contact your employer to get clarification. After your employer responds, the IRS will issue a determination on whether you’re a contractor or an employee.
Seeking Uncollected Taxes
Independent contractors are required to pay all their own Social Security and Medicare taxes – but employers take them right out of employees’ paychecks (and the employer pays half). If a person was misclassified as a contractor when they should’ve been an employee, they can file IRS Form 8919 to report the uncollected taxes.
Related: 1099 vs. W-2 workers
Filing a Wage Claim Against Your Employer
If you have been denied overtime pay, you may file a wage claim with the Division of Labor Standards Enforcement. Alternatively, you can file an action in court.
Contacting an Attorney
If you intend to take your employer to court, you may want to have an attorney in your corner. Your lawyer will collect all the relevant information and help you through the case.
Do You Need to Talk to a Lawyer to Learn What You Can Do About Salary Misclassification?
If you believe you’re a misclassified employee, we may be able to help you. Call us at 818-230-8380 or fill out the form below to tell us about your situation. We’ll be happy to answer your questions and point you in the right direction.