Independent Contractor Misclassification Lawsuits

Many other claims and penalties are triggered immediately when the judge or jury determines that misclassification has occurred. Often a finding of misclassification as an independent contractor triggers penalties for failing to provide meal breaks, failing to provide rest breaks, failing to provide compliant wage statements, and failing to pay final wages on time if the worker no longer performs services for the company.

California Labor Code § 226.8(a)(1) states, in relevant part, that, “It is unlawful for any person or employer to willfully misclassify an individual as an independent contractor.” California Labor Code § 226.8(i)(4) states, in relevant part, that “‘Willful misclassification’ means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

California Labor Code § 226.8(b) states, in relevant part, that, “If a person or employer has willfully misclassified an individual as an independent contractor, the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law.”

California Labor Code § 226.8(c) states, in relevant part, that, “If the person or employer has engaged in or is engaging in a pattern or practice willfully misclassifying individuals as independent contractors, the person or employer shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation, in addition to any other penalties or fines permitted by law.”

The California Supreme Court has explained that the “the right to control work details is the most important or most significant consideration.” Ruiz v. Affinity Logistics Corp. , 754 F.3d 1093, 1100 (9th Cir. 2014) (quoting S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341, 350 (1989)); see also Estrada v. FedEx Ground Package Sys ., 154 Cal. App. 4th 1 (2007) (“The essence of the test is the ‘control of details’ — that is, whether the principal has the right to control the manner and means by which the worker accomplishes the work.”). The Borello Court identified several secondary factors which are also considered by courts, namely, “(1) whether there is a right to fire at will without cause; (2) whether the one performing services is engaged in a distinct occupation or business; (3) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (4) the skill required in the particular occupation; (5) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (6) the length of time for which the services are to be performed; (7) the method of payment, whether by the time or by the job; (8) whether or not the work is a part of the regular business of the principal; (9) whether or not the parties believe they are creating an employer-employee relationship; (10) whether the classification of independent contractor is bona fide and not a subterfuge to avoid employee status; (11) the hiree’s degree of investment other than personal service in his or her own business and whether the hiree holds himself or herself out to be in business with an independent business license; (12) whether the hiree has employees; (13) the hiree’s opportunity for profit or loss depending on his or her managerial skill; and (14) whether the service rendered is an integral part of the alleged employer’s business.” Sotelo v. Medianews Group, Inc. , 207 Cal. App. 4th 639, 656-657 (2012).

The rules regarding classifying a worker as an employee versus an independent contractor can be tricky to navigate. The central factor to determine whether someone was misclassified as an independent contractor is whether the company has the right to control how the worker performs work. For instance, if a worker can choose to work when he wants, where he wants, and how he wants, the worker may be a valid independent contractor. If a company hires an electrician to fix a faulty circuit breaker panel, the company generally cannot dictate how the electrician conducts the repair. However, a worker at the same company who has a designated schedule, must report to the company’s physical location week-after-week, and must follow detailed instructions regarding how to perform a task is more likely to qualify to be treated as an employee; if this worker is treated as an independent contractor, he likely has a claim that he was misclassified as an independent contractor.