California employers benefit by misclassifying workers

Independent contractors work for California employers but are not classified as employees. Contract workers are not afforded the job protections employees have due to this separate title. Without the status of an employee, independent contractors forfeit benefits like group health care coverage, workers’ compensation benefits for job-related illnesses and injuries and family leave.

Los Angeles employers do not have to pay unemployment or disability insurance for independent contractors. Insurance payments and taxes for Social Security and payroll are absorbed by the contractors themselves. In addition, independent contractors may be paid less than minimum wage and lose out on overtime pay.

The laws guaranteeing an employee protection from retaliation for filing complaints against an employer don’t apply to independent contractors. Despite obvious drawbacks, the population of independent contractors has swollen nationwide. In 2005, more than 10 million U.S. workers were classified as independent contractors.

As self-employed individuals, independent contractors bear the full burden of their own employment — many people like being their own boss. Employers have obvious reasons to be attracted to independent contractors. The lack of worker responsibility is so appealing some California companies illegally misclassify employees as independent contractors, costing the state about $7 billion a year in payroll taxes.

The willful misclassification of employees cheats workers and breaks California law, which imposes civil fines of up to $25,000 for each employer violation. Employees may file misclassification complaints with the state Labor Commissioner’s Office.

Workers may be confused about classifications, but that’s not surprising considering laws and government agency rules conflict over descriptions of independent contractors. The Division of Labor Standards Enforcement presumes a complainant is an employee when a case is filed.

These complex rules have forced courts to make misclassification judgments on a case-by-case basis. An employment attorney can clarify whether a job status complaint is justified. Lawyers also help workers recover compensation for losses they’ve suffered due to misclassification.