employee misclassification

How California Employers Can Avoid Employee Misclassification

February 27, 2023 | by Nassiri Law

As Los Angeles employment lawyers, our focus is advocating for workers whose legal rights as employees have been violated by their employer. Most people immediately think of workplace issues with discrimination, harassment, wrongful termination, etc. But it often involves classifying employees improperly – categorizing them as independent contractors as opposed to employees, in turn denying workers the employment protection and benefits that the title of “employee” confers by law.

An estimated one-third of all employers in the U.S. have misclassified at least one worker at some point.

Sometimes, this “mix-up” is willful and intentional, with the employer aware of exactly what they were doing with the specific (if not express) goal to deprive workers of the rights and compensation to which they’d otherwise be entitled. But in a lot of cases, the employer may simply not understand how the law applies.

Lack of intent on the part of the employer isn’t a full-proof defense. If an issue is discovered, employers still have a responsibility to come correct once they’re made aware. That might mean back pay, tax contributions, and liquidated damages for however long the misclassification lasted. However, those whose employee misclassification was intentional are likely to face more significant fines and other penalties from the government and courts.

While our Los Angeles employment lawyers represent the workers in these scenarios, we’ve handled enough of these cases to be able to provide employers with a few tips on making sure employees are appropriate classified in your operation. Yes, this helps mitigate the organization’s liability, but also to make sure workers are treated fairly – and that’s always been our ultimate goal.

What is an Independent Contractor, Exactly?

Workers in the U.S. can typically be classified as either employees or independent contractors. (There are also other contingent employment arrangements, such as on-call, on-retainer, or temp agency workers.) Continue Reading ›

Gig Employers Want California Worker Classification Law Declared Unconstitutional

July 12, 2022 | by Nassiri Law

Lawyers for two large “gig” employers want California’s worker classification law declared unconstitutional by a federal appellate court, which they are lobbying to block its enforcement.

The U.S. Court of Appeals for the Ninth Circuit is slated to hear arguments from attorneys for Uber and Postmates that that the state law that determines who is an “employee” and who is an “independent contractor” is irrational, treats similarly-situated workers and professions unfairly, and is discriminatory toward some tech-based employers like Uber, while exempting errand-based apps that use similar driver-courier models.

As our Los Angeles employment lawyers can explain, the law being targeted is A.B. 5. It is the provision under which a worker is considered an employee unless the hiring entity can prove it was an independent contractor relationship through the ABC test – a three-factor analysis that examines the control over which the hiring entity had over the worker. The California employee classification rule impacts thousands of workers in the so-called “gig economy.” Although they enjoy flexibility, they lack certain employer-covered legal protections, such as unemployment benefits, overtime, paid meal breaks, and workers’ compensation.

It’s unlikely that the Ninth Circuit’s final ruling will be the last word. Whatever the ultimate decision is likely to be appealed to the U.S. Supreme Court. That might be a smart gamble for the company’s especially, given the solidly conservative majority of the U.S. Supreme Court. The consensus by many California employment law attorneys is that deep-pocketed companies are essentially playing the long-game of establishing a virtual monopoly on taxiing services. Doing so gives them greater power to lobby for laws (including employment laws) that bend to their favor.

That’s why this case is one that states beyond California’s borders are watching closely. Its history is one that extends back a few years. Continue Reading ›

Court: California Can Enforce AB5 Against Trucking Companies for Employee Misclassification

May 1, 2021 | by Nassiri Law

The State of California can begin enforcing a labor law geared to combat employee misclassification that trucking companies say will force them to eliminate the use of independent owner-operators. The 9th Circuit Court of Appeals ruled that a judge in San Diego was wrong to hand down an injunction barring the state’s labor commissioner from enforcing the 2019 Assembly Bill 5.

The statute codified the 2018 ruling in Dynamex Operations W. v. Superior Ct. by the California Supreme Court, formalizing the so-called “ABC Test” of ascertaining when a person is an employee or an independent contractor.

As our Los Angeles employment attorneys can explain, employee misclassification has long been a serious problem in California, with companies intentionally classifying workers wrongly as independent contractors rather than employees to avoid responsibility for things like minimum wage, required breaks, workers’ compensation insurance coverage and more. Continue Reading ›

Regulators Target Gig Economy for Crackdown on Wage and Hour Violations

August 21, 2020 | by Nassiri Law

In the first AB5 enforcement lawsuit over California wage and hour violations, the state labor commissioner alleges that a gig-economy car wash company in Southern California is breaking the law by misclassifying workers as independent contractors when in fact they are employees. It’s the same argument that has been made in numerous employment lawsuits against gig economy giants like Uber and Lyft.

As our Los Angeles employee misclassification attorneys can explain, this issue has become so problematic because employees who are wrongly classified as independent contractors lose out on a host of employment benefits, including minimum wages, overtime, health insurance, tax breaks and underpayment of things like Social Security, Medicare, etc.

The defendant in this action, MobilWash, uses an app to offer on-demand car wash and detailing services. Customers can order the services, pay for them and provide a tip all through their phone. Workers use their own vehicles and supplies, go to the customer’s vehicle and provide the cleaning services. They must purchase their own uniforms, insurance, cleaning equipment and supplies and gas. Workers are not reimbursed for travel time or business expenses – as they would be if they were employees. Further, the company charges a $2 transaction fee for every tip the workers receive, something the labor commissioner says is illegal.

Recently, the Orange County Register editorial board posited that if the arrangement wasn’t working for those involved, it wouldn’t be successful. The labor commissioner says that’s not a solid legal argument, and that if a worker puts in 10 hours daily for six days each week, they’re entitled to more than $1,500 in weekly wages (which includes minimum wage plus overtime), something they aren’t receiving. The board argued that such companies are never going to operate like traditional factories, with workers spending 10 consecutive hours daily, clocking in and out, when the whole concept of the service is being on-demand. Continue Reading ›

Journalists May Be Exempted from AB5, California’s Contractor Law

February 28, 2020 | by Nassiri Law

Freelance journalists may soon be exempted from the controversial Assembly Bill 5, which went into effect Jan. 1st. The new law codified the California Supreme Court’s ruling in the Dynamex case, which established an “ABC test” for ascertaining whether workers are misclassified as independent contractors when in fact they should be receiving all the benefits of employment.

The law, introduced by Assemblywoman Lorena Gonzalez, has been the target of gig industry behemoths like Postmates, Lyft and Instacart. Freelance journalists, though, are another group that has been embroiled in a fight over AB5. Specifically, the law stipulates that a journalist who produces more than 35 submissions to a single entity should be considered an employee. But that, freelancers say, would effectively kill their career. Media companies, who increasingly can hire reporters and photographers who live and work anywhere, would be less inclined to hire writers from California – or cut them off at the 35-submissions mark.

Gonzalez said she had received extensive feedback from writers, photographers and journalists about how this would impact their ability to make a living, and said changes would be made to accommodate them, while still offering protection against employee misclassification. She indicated that amendments to the law would be introduced that would remove the submission cap. However, contractors still cannot replace employees. Contracts with freelance journalists would also need to expressly indicate the pay rate, payment deadline, individual’s copyrights to the work. Companies also won’t have the right to restrict freelancers from working for more than one outlet, and they can’t mainly perform their work on the business’s premises. Continue Reading ›

Legal Challenges to California’s Gig Worker Law Are Likely to Abound in 2020

December 30, 2019 | by Nassiri Law

The state’s new worker classification law takes effect on Jan. 1st. Those behind the AB5 legislative effort know it was an uphill battle – but it appears the fight isn’t over yet. Court cases challenging the law are piling up, some companies are saying they simply won’t cooperate (likely to lead to more litigation) and there is a looming multimillion-dollar ballot initiative gearing up for next November.

Our Los Angeles employee misclassification attorneys will be watching these developments closely to see how these disputes unfold.

AB5 is going to make it more difficult for companies to label their workers as independent contractors rather than employees. Legislators backing the measure pointed to mounting evidence that companies are improperly classifying workers as independent contractors to avoid the added expenses of things like workers’ compensation benefits, health insurance, minimum wage, overtime, unemployment insurance, the right to unionize and other benefits to which employees (but not independent contractors) are entitled.

Employer preparations for AB5 should already be well underway. If you operate a small business and still aren’t sure about whether your operations fall under the umbrella of AB5 or if so, how to restructure your employment model, it’s imperative that you contact a longtime employment law firm to help protect your legal interests. Some companies have been able to find creative workarounds that satisfy employees as well as their bottom line. This can include using staffing agencies, having contractors form an LLC (to qualify for a business-to-business exemption) and other strategies. Continue Reading ›

Effect of Tighter Independent Contractor Rules on California’s Small Businesses

December 26, 2019 | by Nassiri Law

A new law intended to make it harder for companies to misclassify workers as independent contractors rather than employees has been the source of much controversy and litigation – even though it doesn’t take place for another week.

Los Angeles employment lawyers know that while AB5 has a fair amount of detractors among mega-corporations like Uber (largely the kind of worker relationship model the law intended to target), small businesses that use freelance independent contractors are likely to be impacted too.

The designation of independent contractor has become a store point for lawmakers and labor advocates who argue many of these workers are doing jobs that should count them as employees, entitling them to certain valuable benefits like minimum wages, overtime, sick pay, workers’ compensation insurance if they’re hurt on the job or unemployment insurance if they’re suddenly laid off. Freedom from the responsibility of having to pay these expenses has proven an attractive prospect for many employers. But their designation isn’t the last say. It can be challenged – and increasingly is – since last year’s Dynamex decision by the California Supreme Court and now AB5, both of which strengthen worker protections and make it more difficult for companies to claim workers are independent contractors as opposed to employees. Continue Reading ›

Federal Judge Won’t Force Uber to Reclassify California Drivers as Employees

December 17, 2019 | by Nassiri Law

A federal judge in California declined to compel ridesharing company Uber to reclassify its drivers as employees, rejecting plaintiffs’ claims that the alleged misclassification of workers adversely impacts the state of valuable tax dollars due to public assistance spending for low wage workers.

Plaintiffs filed the motion for injunction by asserting it would benefit the general public. In an 18-page ruling in Colopy v. Uber Technologies Inc., the U.S. District Court for the Northern District of California declined to treat the motion as a “public injunction,” finding the case’s primary plaintiff, is seeking a private injunction, not a public one. He noted the Ninth Circuit Court of Appeals tends to disfavor class-wide injunctions in such cases, particularly where no certification has been awarded to the class. Further, he pointed out that many of Uber’s drivers in California had signed arbitration agreements upon employment, meaning most of the drivers in question wouldn’t be entitled to such relief anyway.

Plaintiff employment attorney argued the technology firm impacts not only its own drivers but the industry as a whole, thus negatively affecting a large number of workers by depriving them of employment rights as spelled out in the state’s labor code. Defendant lawyers meanwhile argued an injunction wasn’t needed because drivers would still have the ability to obtain damages for statutory violations after the resolution of the case. A preliminary injunction that would force the company to switch up its entire business model should be considered “extraordinary,” they argued. Continue Reading ›

FEHA Employment Discrimination Claims Against “Contracting Employer” May Be Valid

November 13, 2019 | by Nassiri Law

Independent contractors are entitled to far fewer rights under California employment law than employees or in some cases even job applicants. In filing an employment lawsuit against a company, one must establish they are an employee or prospective employee.

But as our Los Angeles employment attorneys know well, misclassification of employees as independent contractors is rampant. It’s often left to the court’s to decide.

Recently, a California appellate court ordered a new trial in the case of a worker who was technically a temp agency employee, but who took on a supervisory position for five years at the shoe care manufacturing company with which the temp agency contracted. Although the temp agency cut her checks, it was the manufacturer that had the direction and control of her day-to-day work. This, the court ruled, made her an employee for purposes of relief for alleged discrimination and wrongful termination under California’s Fair Employment and Housing Act.

Independent Contractor v. Employee

There is no set definition of the term “independent contractor,” which is why courts and enforcement agencies are often asked to consider the fact pattern of each case where employment status is a possible issue. The Division of Labor Standards Enforcement begins with the presumption that a worker is an employee, but it is one that can be rebutted by the employer. Continue Reading ›

New California Employment Bill on Independent Contractors Signed Into Law

September 18, 2019 | by Nassiri Law

With the stroke of Gov. Gavin Newsom’s pen, the sweeping California employment law limiting businesses’ use of independent contractors has become law and will go into effect Jan. 1, 2020.

Assembly Bill 5 had the overwhelming support of the state legislature, and the governor’s signature was widely anticipated, as his office had already voiced support for the measure.

Orange County employment lawyers know the goal is to reduce instances of worker misclassification, which is when employees are improperly designated as “independent contractors” rather than “employees,” which deprives them of a host of basic protections afforded to employees, such as:

Minimum wage;
Sick days;
Health insurance benefits;
Meal breaks;
Rest breaks;
Workers’ compensation insurance.