How Much Can You Sue an Employer for Misclassification?

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Employee misclassification is a significant issue in California employment law. Misclassifying employees as independent contractors, or exempt workers can have serious consequences for both employers and employees. If you’ve been misclassified, you may have legal grounds to sue your employer and recover compensation for unpaid wages, benefits, and other wage and hour reasons. Curious how much you can sue an employer for when they misclassify you? Keep reading.

What is Employee Misclassification?

According to the Fair Labor Standards Act, employee misclassification occurs when an employer incorrectly categorizes a worker as an independent contractor or an exempt employee rather than a non-exempt employee. This misclassification can deprive workers of important rights such as minimum wage, overtime pay, meal and rest breaks, and other legal protections for employees under California’s labor laws.

In California, misclassification is often evaluated under the ABC Test, which requires that to classify a worker as an independent contractor, the employer must prove:

1. The worker is free from the control and direction of the employer in connection with the performance of the work.
2. The worker performs work that is outside the usual course of the hiring entity’s business.
3. The worker is customarily engaged in an independently established trade, occupation, or business.

If the employer fails to meet any of these three requirements, the worker must be classified as an employee.

For exempt employees, the employer must meet specific criteria for exempting employees from overtime laws, usually based on their job duties and salary.

Can You Sue an Employer for Misclassification?

If an employer misclassifies you, the damages you can recover vary based on several factors, including how long the misclassification occurred and what rights were violated. A worker may be able to sue for the following:

1. Recover Unpaid Wages and Overtime

One of the most common forms of compensation in misclassification cases is unpaid wages. Non-exempt employees are entitled to minimum wage, overtime pay, and meal/rest breaks under California law. If you were classified as an independent contractor or exempt employee, you may be entitled to recover:

• Unpaid overtime: California law requires overtime pay of 1.5 times the regular hourly rate for hours worked beyond 8 hours in a day or 40 hours in a week, and double time for hours worked over 12 hours in a day. Misclassified employees may sue for unpaid overtime wages if they were improperly paid.
• Unpaid meal and rest breaks: California requires that employees receive a 30-minute meal break after five hours of work and a 10-minute rest break for every four hours worked. If you were denied these breaks due to misclassification, you can claim one hour of pay at your regular rate for each day you were denied a break.

2. Reimbursement of Business Expenses

If you were misclassified as an independent contractor, your employer may have shifted business expenses to you that should have been covered under California Labor Code § 2802. This law requires employers to reimburse employees for all necessary expenditures or losses incurred during the course of their duties. You may be able to recover:

• Costs for work-related travel
• Equipment or tools you had to purchase
• Phone or internet expenses used for work purposes

3. Penalties and Interest

In addition to unpaid wages, misclassified workers can be entitled to penalties and interest. Employers who fail to pay wages on time may be subject to waiting time penalties under California law. Waiting time penalties can amount to one day of pay for each day the wages were late, up to a maximum of 30 days.

What to Do If You’ve Been Misclassified

If you suspect you’ve been misclassified as an independent contractor or exempt employee, it’s crucial to take action to protect your rights:

1. Document everything: Keep records of your hours worked, wages received, job duties, and any expenses you’ve incurred. These records will be crucial if you decide to pursue legal action.
2. Seek legal advice: Consult with an employment attorney who specializes in wage and hour law. An attorney can help you determine if you’ve been misclassified and guide you through the process of filing a claim.
3. File a claim with the California Labor Commissioner: You can file a wage claim with the California Division of Labor Standards Enforcement (DLSE). The Labor Commissioner can investigate your claim and hold a hearing to determine if you are owed unpaid wages.

California Misclassification Penalties

Beyond potential damages owed to a misclassified employee, employers who misclassify their workers may face significant penalties by the state of California. Penalties serve to ensure that employers treat workers with respect, fairness, and dignity.

1. Penalties for Misclassifying Workers

Employers who misclassify workers may be subject to penalties. Under California’s Labor Code Section 226.8, employers can be fined $5,000 or more, per violation, and if the misclassification is determined to be willful, the fines can increase.

2. Waiting Time Penalties

If an employer fails to provide a misclassified employee with their final wages, including all accrued overtime, vacation pay, and other compensation, they may be subject to waiting time penalties under Labor Code § 203. These penalties can amount to one day of pay for each day the wages are late, up to 30 days’ worth of pay.

3. Attorney’s Fees and Costs

In many employment law cases, including misclassification lawsuits, the prevailing employee may be entitled to recover attorney’s fees and court costs. This ensures that workers can pursue their claims without bearing the financial burden of legal representation.

4. Audits and Investigations

Employers who are found to have misclassified workers may be subject to audits and investigations by state agencies, including the California Department of Industrial Relations. These audits can lead to additional penalties, back taxes, and increased scrutiny on the employer’s labor practices.

Misclassification Lawsuit

If an employee feels like they have been taken advantage of by improper worker classification, they should reach out to the experienced employment law attorney team at Lawyers for Justice, PC (LFJ) for a free consultation. If an employee lost wages, the team at LFJ may be able to help recover them. By holding employers accountable for misclassification, California workers can ensure their rights are protected and receive fair compensation for their work.

Employee misclassification can have severe financial consequences for both the worker and the employer. Misclassified employees are often deprived of wages, benefits, and other legal protections, while employers may face significant financial penalties and legal liabilities.