If your employer classifies you as an independent contractor, but you’re doing the same work as the company’s employees, you’re probably wondering: Am I really an independent contractor, or am I being misclassified?
I’m Matt Ruggles, and I’ve spent more than 30 years litigating unpaid wage claims on behalf of California employees. A major part of my work involves helping people who were misclassified as independent contractors recover what they’re owed. I’ve represented workers across dozens of industries including tech, construction, healthcare, delivery services, sales, and in many cases, I’ve recovered significant amounts of unpaid wages, penalties, and interest.
Misclassification isn’t a technicality. It’s a legal strategy employers use to avoid paying overtime, benefits, and taxes. But California law is clear. If your employer wants to call you an independent contractor, they have to prove it. And they can only do that by meeting all three parts of the ABC Test.
What is Employee Misclassification in California?
Employee misclassification in California happens when a worker is labeled an independent contractor but legally meets the definition of an employee under Labor Code § 2775. This often results in unpaid wages, missed breaks, and lost benefits.
In California, the law presumes that workers are employees, not independent contractors. To classify you as an independent contractor, your employer must meet all three parts of the ABC Test, as set out in California Labor Code § 2775. If they fail even one part, you’re misclassified and you may be entitled to back pay, penalties, and other damages.
What Is California’s ABC Test for Independent Contractors?
Under California law, following the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court and the enactment of Assembly Bill 5 (AB 5) in 2019, a worker is legally presumed to be an employee, not an independent contractor, unless the hiring entity can prove all three parts of what’s known as the ABC Test. This test sets a strict legal standard that employers must meet to lawfully classify a worker as an independent contractor.
Let me walk you through each part of the ABC Test and explain what it actually means.
Part A: You’re Free from the Company’s Control
The first part of the ABC Test looks at how much control the company has over your work, both on paper (in your contract) and in reality. To be considered an independent contractor under California law, you must be free from the hiring entity’s control and direction in how you perform your work.
This means the company cannot treat you like an employee by directing your daily tasks or managing how, when, and where you do your job. Key factors include:
- Setting your own schedule: You choose your working hours without needing approval or being assigned shifts.
- Autonomy in how the work is done: You decide the methods, tools, and approach for completing the job. You’re not following a detailed playbook or process dictated by the company.
- No direct supervision: You aren’t reporting to a manager or being regularly evaluated, corrected, or trained by someone within the company.
- Minimal performance oversight: You’re not subject to performance reviews, team meetings, or micromanagement.
Even if the company doesn’t control every detail, it may still be exerting too much control if it sets deadlines, quality standards, communication protocols, or approval requirements that go beyond the scope of an independent business relationship.
In practice, if your job functions like that of a regular employee, where you show up when told, do the work as directed, and answer to company management, then your employer’s determination that you are an independent contractor is incorrect.
Part B: You Do Work Outside the Company’s Usual Business
Part B of the ABC Test asks a straightforward but critical question: Are you performing work that falls outside the company’s core business? If the work you’re doing is the kind of work the company exists to provide, meaning it generates revenue from that work, then you’re likely an employee, not an independent contractor.
To satisfy Part B, your role must be clearly separate from the company’s regular business operations. You must be providing a service that is tangential or unrelated to what the company offers to customers.
Here’s how to think about it:
- If a retail store hires a plumber to fix a broken pipe, the plumber is doing work that has nothing to do with selling merchandise. That passes Part B.
- If that same retail store hires a freelance cashier to ring up customers, that fails Part B. Cashiering is central to the store’s business.
Similarly:
- If a bakery hires someone to decorate cakes for its customers, that person is contributing to the product being sold and fails Part B.
- But if the bakery hires a graphic designer to redesign its logo, that designer is providing a service unrelated to baking or selling cakes, which would likely satisfy Part B.
The key issue is economic integration. If your work is woven into the company’s core operations, whether you’re producing goods, delivering services, or interacting with customers, then you’re helping the business generate revenue. That makes you part of the usual course of business, and it means that your employer’s determination that you are an independent contractor probably fails Part B.
If you’re doing the same kind of work as the company’s employees, or the work you do is the company’s product, that’s a major sign you’ve been misclassified.
Part C: You Run Your Own Independent Business
Part C of the ABC Test focuses on whether you are truly operating an independent business, not just working under that label. For your employer’s determination that you are an independent contractor to pass Part C, you must be in business for yourself in a meaningful and active way, separate from the company that hired you.
This means more than just signing a contract that calls you an “independent contractor.” Labels don’t matter. What matters is whether you actually run a business that offers the same type of services to multiple clients or the general public, and whether that business exists independently of the company paying you.
To meet this standard, you should be able to show things like:
- You work with multiple clients. You do not just work for one company that gives you all your income.
- You advertise your services publicly or through a business website.
- You hold a business license, have your own tools or equipment, and possibly operate under a separate legal entity such as an LLC or sole proprietorship.
- You make real business decisions about pricing, project selection, scheduling, and how you deliver your services.
If you work for just one company, have no outside clients, and rely entirely on that company for income, your employer’s determination that you are an independent contractor ( and not an employee) likely fails Part C of the ABC Test. California Labor Code § 2775 makes clear that labels and contracts don’t matter and the law looks at the reality of your working relationship. Unless your business operates independently and serves others, you’re presumed to be an employee. And if that’s true, you may be entitled to unpaid wages, expense reimbursements, and penalties.
Did You Fail Any Part of the ABC Test? If Yes, Then You are NOT an Independent Contractor
This isn’t a best-of-three test. Your employer must prove all three parts of the ABC Test in order to classify you as an independent contractor. If your employer fails even one section of the test, you’re not an independent contractor under California law, you’re an employee.
And if you’ve been misclassified, your employer may owe you:
- Unpaid minimum wage or overtime
- Meal and rest break penalties
- Reimbursement for business expenses
- Waiting time penalties
- Interest and attorney’s fees
What to Do If You Think You’ve Been Misclassified as an Independent Contractor
If you’ve gone through the ABC Test and realized that you probably don’t qualify as an independent contractor under California law, then you’ve taken the first important step. But recognizing misclassification is only the beginning. Now you need to figure out whether you’re owed money and what to do about it.
I’ve been handling these kinds of wage disputes for over three decades, and I’ve helped a lot of workers recover what they were wrongly denied. Here’s what I tell clients who’ve been misclassified:
For a step-by-step guide to recovering what you’re owed, check out my blog, “How Do I Resolve an Unpaid Wages Dispute in California?”
Step 1: Confirm That You’re Actually Misclassified
It’s not enough to feel like an employee, you need facts that line up with the ABC Test. If you were under company control, doing work central to the business, and not truly running your own independent operation, then you likely meet the legal definition of an employee.
If you’re unsure, write down:
- Who supervised your work and how often
- What kind of work you did and whether it matched what the company sells
- Whether you worked for other clients during that time
- Whether you had a business license, did your own marketing, or set your own prices
This list helps you build your case.
Step 2: Calculate What You’re Owed
If you were misclassified, you were likely denied basic wage rights. Here’s what to check:
- Unpaid overtime: Did you work more than 8 hours in a day or 40 in a week?
- Missed meal and rest breaks: Were you working long shifts without a proper break?
- Reimbursement for expenses: Did you cover your own gas, equipment, or phone bills?
- Waiting time penalties: Did the company delay your final paycheck when you stopped working?
If the answer to any of those is yes, you may be owed thousands of dollars or more.
You don’t need to be perfect in your math, but start gathering your records: time logs, texts, emails, pay stubs, and anything that helps show how you worked and how you were paid.
Step 3: Consider Asking Your Employer for the Wages You’re Owed
Sometimes a straightforward written request to the company works if it’s done professionally and backed by clear facts. You can explain that you believe you were misclassified under California’s ABC Test and ask for payment of the wages you’re owed.
Just be cautious. If you still work there, speaking up may put your job at risk. And if the letter isn’t taken seriously, or is done poorly, it could backfire. That’s why I often advise people to skip this step unless they’re confident, no longer working there, or prepared for what comes next.
For tips on how to speak up without putting your job at risk, read my blog, “How Do I Ask for Unpaid Wages Without Getting Fired?”
Step 4: Talk to an Employment Lawyer
If the company ignores you, brushes you off, or offers a lowball settlement, it’s time to bring in a professional. A good employment attorney can:
- Verify whether you’ve been misclassified
- Calculate the full scope of your claim
- Send a formal demand letter backed by legal authority
- File a lawsuit if necessary
Most wage attorneys, my firm included, work on a contingency basis. That means you don’t pay anything upfront, and we only get paid if we win.
To learn more about how misclassification is used to deny workers their rights, read my blog, “California Employee Misclassification: How Employers Steal Pay.”
FREQUENTLY ASKED QUESTIONS ABOUT EMPLOYEE MISCLASSIFICATION
How do I know if I’m misclassified as an independent contractor in California?
If your employer controls your schedule, assigns your daily tasks, or you perform work that’s part of the company’s main business, and you don’t run your own business independently, there’s a strong chance you’ve been misclassified.
What happens if my employer’s determination fails just one part of the ABC test?
Under California law, if the employer cannot prove all three parts of the ABC test, you are presumed to be an employee. Failing even one part is enough to invalidate independent contractor status.
Does it matter if I agreed with the company that I would be an independent contractor?
No, agreement between the worker and the company that the worker will be an IC does not change any of the analysis. Determination of IC/employee status is never a matter of agreement, and with very limited exceptions, can only be made by application of the ABC test.
What should I do if I’ve been misclassified as an independent contractor?
You should contact an experienced employment attorney to evaluate your situation. You may be entitled to unpaid wages, penalties, and expense reimbursement going back several years.
Can I sue my employer for misclassifying me as a contractor?
Yes. If you’ve been misclassified, you can file a wage claim with the California Labor Commissioner or pursue a civil lawsuit to recover damages. A lawyer can help you decide the best route.
How much money can I recover if I’ve been misclassified?
It depends on how long you were misclassified and what you were denied. You may be able to recover unpaid overtime, missed meal/rest break penalties, waiting time penalties, business expenses, interest, and legal fees.
Is it illegal for my employer to label me an independent contractor just to avoid taxes or benefits?
Yes. Misclassifying employees as independent contractors to avoid payroll taxes, overtime, or benefits is a violation of California labor law. If proven, the employer can face significant penalties.
Final Thoughts from Matt Ruggles
If your job walks like a W-2 and talks like a W-2, but your employer calls you an independent contractor, they may be violating California labor law and owe you unpaid wages.
Let’s talk. We can evaluate whether you were misclassified and help you recover what you’re owed.
Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit
Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts. Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.
Contact the Ruggles Law Firm at 916-758-8058 for a free, no-obligation consultation.
Blog posts are not legal advice and are for information purposes only. Contact the Ruggles Law Firm for consideration of your individual circumstances.
