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An employer can save a significant amount of money when they classify a worker as an independent contractor as opposed to an employee. The reason being, if a company labels an individual as an employee they are required by law to pay unemployment insurance, Medicare, and social security tax. Unfortunately, businesses misclassify employees all the time. Luckily, there are protections available for workers misclassfied in San Diego and California as a whole.
An independent contractor is responsible for paying all of their Medicare as well as social security taxes out of their earnings. When a person is classified as an independent contractor, they are not protected by minimum hourly wages, rest breaks, overtime pay and more. Laws that would protect a person from discrimination based on religion, sex, disability and harassment do not apply when a worker is an independent contractor. An independent contractor will not qualify for the Family Medical Leave Act either. A company doesn’t have to pay for unemployment insurance for their independent contractors.
An employee will see Medicare and social security taxes taken out of their paycheck as FICA. An employee splits these taxes with their employer. An employee will pay 5.65 percent, and an employer will pay 7.65 percent. An employee is able to receive unemployment benefits, FMLA, and other benefits.
There are certain factors that can be utilized to determine if a person meets the criteria of being misclassfied in California. These factors are often referred to as The Economic Realities Test and used in determining whether an employment relationship exists under the FLSA:
For a more in-depth breakdown, visit the DOL website for specific examples, case references and more.
If you feel your employer has misclassified you as an Independent Contractor when you felt you were an employee, you have options available to rectify your situation. Below is a basic outline of the steps you could follow if you’ve been misclassified:
Should a worker feel they have been misclassified as an Independent Contractor in San Diego, their first step should be to speak with their employer. It is possible the employer didn’t understand the requirements were met for them to be an employee. While this is highly unlikely, understanding the employer’s reasoning for classifying you as an Independent Contractor instead of an employee is a great starting point.
If speaking to your employer doesn’t work, it may be time to contact the IRS. A person can let them determine their classification. This can happen when a worker files the IRS Form SS-8. This form is used to determine a worker’s status in regards to tax withholding and paying federal income tax. This form will ask a person a series of questions concerning the nature of their work for the company. Once Form SS-8 is received by the IRS, they will contact the employer. This will be done to confirm the information on the form is accurate. Should the IRS determine that a person is an employee and not an Independent Contractor, the decision is binding.
When an individual believes they have been misclassified as an Independent Contractor in San Diego, they can also file a wage claim with the Division of Labor Standards Enforcement (DLSE). The circumstances of the claim and the information it presents will be used to determine the next course of action. It can be dismissed or deferred to a conference before heading to a hearing if that is deemed necessary.
If granted a conference, the individuals involved in the case are notified by mail when and where the conference will take place. The goal of the conference is to decide the validity of the claim. There will be an effort to see if a claim can be satisfied to avoid a hearing. Should the claim not be resolved during the conference, the next step in the process would be a hearing.
At a hearing, each party will be permitted to provide witnesses who will testify under oath. The hearing’s proceedings will be recorded. Upon the conclusion of the hearing, the labor commissioner will serve an Order, Decision or Award (ODA) for each of the parties. The ODA decision can be appealed in a civil court.
A person is also able to file a court action to recover any lost overtime wages and more. Should a person be determined to be an employee, but no longer work for the company, they can make a claim for the waiting time penalty. This is found in the Labor Code Section 203.
Should a person in the San Diego area believe they have been misclassified as an Independent Contractor, they should contact Walker Law. Our misclassification attorneys in San Diego understand how to approach your claim and will work with you every step of the way. Contact Walker Law today for a free consultation by clicking here.