In the construction industry, among others, misclassifying employees and labeling them as independent contractors is not uncommon because it saves on the payment of company benefits as well as payroll taxes. If misclassification has happened to you, you may not be covered under minimum wage and overtime protection laws in California.
Reason for concern
Let us say that you are a carpenter hired by a company that specializes in residential remodeling projects. You had only been working there for a short time and were looking forward to your first paycheck, which should have reflected the overtime hours you put in to meet the deadlines imposed by the construction superintendent. Furthermore, your paycheck should have shown the usual tax deductions, but that information was also missing. The problem is that you were classified as an independent contractor, not a company employee.
The U.S. Department of Labor has joined forces with the IRS and state workforce agencies to pinpoint questionable employment practices. The government has been coming down on the misclassification of employees and has targeted certain industries specifically, including construction. Other industries where this practice has become prevalent are nursing, staffing, transportation and limousine services, cable companies, catering services, landscaping and security.
Compensation may be due
Overtime accrues, and interest is added. If you were an employee who was misclassified as an independent contractor, you have four years under California law to collect the overtime pay that is owed to you, plus 10 percent interest. If you filed a lawsuit, you may also be able to recover attorney fees and court costs.
Not only would employees like you be affected if you were misclassified as independent contractors, the state of California stands to lose significant payroll tax revenue at a rate of about $7 billion annually. To get the situation back on track, the California legislature passed Senate Bill 459 in 2011. With the enactment of this bill, your company could pay between $5,000 and $25,000 for each misclassification violation–because surely you were not the only carpenter, painter or office worker who was listed as an independent contractor rather than an employee.