San Francisco Employee Misclassification Lawyer

Misclassified Employees

Employers often mistakenly or intentionally treat certain categories of employees as exempt from overtime pay — when in fact they should be classified as non-exempt employees entitled to overtime pay. For example, a major drugstore chain recently settled claims that it had misclassified its northern California “managers” and “assistant sales managers” as exempt from overtime. In fact, these managers spent most of their time performing the same work as the hourly employees they supervised and were entitled to overtime pay. Other employees who are sometimes misclassified as exempt include:

How do workers know whether they have been misclassified as independent contractors?

The U.S. Department of Labor has published a worksheet that describes the factors that courts generally consider under the Fair Labor Standards Act when determining whether an employment relationship exists.  These include:

  1. The extent to which the work performed is an integral part of the employer’s business;
  2. Whether the worker’s managerial skills affect his or her opportunity for profit and loss;
  3. The relative investments in facilities and equipment by the worker and the employer;
  4. The worker’s skill and initiative;
  5. The permanency of the worker’s relationship with the employer;
  6. The nature and degree of control by the employer.

When analyzing whether a worker is an employee or an independent contractor under California state law, the most important factor is whether the employer maintains “the right to control the manner and means of accomplishing the result desired…” S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350.  California courts also look to other factors to ascertain the nature of an employment relationship. The California Division of Labor Standards Enforcement (DLSE) lists and explains the weight that courts often give these factors.

These factors appear to have weighed in favor of employee status in the case against Lowe’s.  While Lowe’s maintained that it committed no wrongdoing, many of the factors alleged by the lead Plaintiff were factors that demonstrate control over workers under federal and California law.  For example, Plaintiff alleged that Lowe’s:

See Shepard v. Lowe’s HIW, Inc. (N.D. Cal., Aug. 19, 2013, C 12-3893 JSW) 2013 WL 4488802.  If true, these are strong indicia of employee status that raise serious doubt regarding the validity of Lowe’s independent contractor model.

What can workers recover if they have been misclassified?

So what can a worker who has been misclassified do about it?  In California, the legislature passed a new law to fight misclassification cases—Labor Code Section 226.8 (effective January 1, 2012)—which makes it unlawful to willfully misclassify an employee as an independent contractor.  Under Section 226.8, employers can face penalties ranging from $5,000 to $15,000 for each isolated violation of the statute, or $10,000 to $25,000 for each violation of the statute if it is determined that the employer is engaging in a “pattern or practice” of misclassification.  California’s Private Attorney General Act (PAGA) permits employees who have been misclassified to collect these penalties in a representative action on behalf of the state.  Under PAGA, a successful employee acting as a private attorney general keeps 25% of the penalties collected, while 75% goes to the state.

Employees can also recover their employment-related business expenses and losses under California Labor Code Section 2802.  These business expenses could include items like equipment, tools, fuel, and other similar costs that should have been paid by the employer if the employer misclassified the worker as an independent contractor.

Misclassified employees may also be entitled to minimum wage and overtime compensation under California Labor Code Section 510 and Section 1194 and under 29 U.S.C. Section 201 et seq. of the Fair Labor Standards Act.

The wave of private and federal enforcement actions points to a problem that remains widespread.  Workers who believe that they have been misclassified as independent contractors should contact an experienced employment law attorney to discuss their rights and potential remedies.

Can I sue if I was fired?

Independent contractors are generally afforded fewer rights than a regular company employee so of the reasons companies attempt to misclassify employees is to give themselves more flexibility when firing them. However, if an employee was indeed misclassified as a contractor, then they may be required to honor your employment rights.