Some California employers think they’ve found a clever way to skip out on paying wages, overtime, and payroll taxes: they use what is known as “independent contractor misclassification” i.e. misclassify workers as independent contractors (ICs) instead of employees. But here’s the truth: just calling someone an “independent contractor” doesn’t make it so. If your employer controls how you do your job, when you do it, and what tools you use, chances are you’re an employee under California law and you’re owed back wages.
I’m Matt Ruggles, and I’ve been practicing employment law in California for over 30 years. I represent employees, not companies, and I’ve built my career holding employers accountable when they steal wages. One of the oldest tricks in the book is slapping the “independent contractor” label on someone who is, by every measure, a regular employee. Why do employers do this? To save money by illegally dodging wage laws, benefits, and taxes.
I wrote this blog because many workers in California don’t realize they’ve been misclassified or don’t know how to fight back when they do. If your employer has misclassified you as an independent contractor, you could be entitled to a significant amount in back wages, unpaid overtime, and other penalties. This blog walks you through how to figure out if you’ve been misclassified and the steps you can take to collect what you’re owed.
Why Employers Use Independent Contractor Misclassification
Employers save a lot of money by improperly misclassifying employees as ICs. Employers commit this illegal act to avoid:
- Paying overtime, minimum wage, and meal/rest breaks
- Making payroll tax contributions (Social Security, Medicare, unemployment insurance)
- Providing workers’ compensation insurance
- Offering benefits like sick leave or health insurance
- Complying with anti-discrimination and harassment laws
But while the employer cuts corners (by breaking the law!), the misclassified worker still has to pay self-employment taxes. In other words, you get hit with both ends of the stick: no employee protections, but all the tax burdens.
California’s ABC Test: Are You Really an Independent Contractor?
Under California law, you are presumed to be an employee (not an independent contractor) unless your employer can prove all three parts of the ABC Test. This test is the legal standard in California and is used to expose sham independent contractor arrangements.
Here’s how each part of the test works:
Part A: You are free from the control and direction of the hiring entity (employer) in how you perform your work.
This means the company can’t micromanage you. If they’re telling you when to show up, what tasks to complete, how to do the work, and when to take breaks, then they’re treating you like an employee. Independent contractors should have control over how and when the work gets done. If you’re being supervised, disciplined, or evaluated like everyone else in the office, that’s a red flag.
Part B: You perform work outside the usual course of the hiring entity’s business.
This is where most misclassification cases fall apart. Let’s say you’re doing delivery work for a delivery company, or sales work for a sales firm. That’s the company’s core business. Employees perform that work, not contractors. But if you’re, say, a plumber fixing the bathroom at a law firm, that’s clearly outside the law firm’s usual business. If what you do is central to the company’s main function, you’re almost certainly an employee.
Part C: You are customarily engaged in an independently established trade or business.
This part asks whether you truly run your own business. Do you market your services to other clients? Do you have business cards, a website, or your own LLC? Do you set your own rates and schedule? True independent contractors have multiple clients and are in business for themselves. If you’re working exclusively for one company, using their equipment, and relying on them for your income, you likely don’t meet this prong of the ABC Test and that means you’re probably misclassified.
If your working relationship doesn’t meet all three of these conditions, the company must legally classify you as an employee and that opens the door to recovering unpaid wages, overtime, missed meal and rest breaks, and other penalties.
To learn more, check out this blog I wrote explaining the ABC Test in more detail: Am I Misclassified as an Independent Contractor in California?
Examples of Independent Contractors Versus Employees
Clear examples of true independent contractors (not an employee):
- Plumbers
- Electricians
- Attorneys
- Accountants
- Doctors
These are professionals who work for themselves, set their own schedules, and serve multiple clients.
Signs You Are a True Independent Contractor (and Not an Employee)
- You set your own schedule and hours
- You use your own tools and equipment
- You have your own business entity (LLC, etc.)
- You advertise your services to other clients
- You’re paid by the project, not hourly
- You work off-site or at multiple client locations
- You carry your own business insurance
If none of that describes your work situation and you’re employer is telling you that you are an independent contractor, you’re probably misclassified.
Clear examples of an employee (not and independent contractor):
- You work full-time for one company
- You report to a supervisor or manager
- You follow a set schedule determined by the company
- You use company equipment, software, or tools
- You perform work that is part of the company’s regular business
- You don’t have other clients or advertise your services
- You’re paid hourly, salaried, or by shift
- You’re eligible (or should be) for company benefits like sick leave or overtime
If this sounds like your work arrangement, you’re likely not an independent contractor no matter what your employer says on paper.
Matt’s Further Legal Insight About Independent Contractor Written Agreements:
Many misclassified workers are handed an “independent contractor agreement” and told to sign it.
That document means very little and does not magically turn a company’s employee into an independent contractor.
I’ve seen it dozens of times. The independent contractor agreement is 100% permissible and correctly describes an independent contractor relationship on paper. But in practice, the worker is treated exactly like the other employees. That agreement won’t help the employer in court.
California law looks at the real-world relationship, not the paperwork. If you’re being micromanaged, told when and where to work, and expected to follow the same rules as employees, then you’re probably an employee, regardless of the label or bogus paperwork your employer forced you to sign so that they could save money by stealing wages.
How to Respond to Independent Contractor Misclassification and Get Paid What You are Owed
Misclassification isn’t a technicality. It’s a form of wage theft. To get paid what you are legally entitled to, follow these steps:
Step #1: Document everything
Start keeping detailed records now. Write down your hours worked each day, where and how you performed your job, who supervised you, and what instructions you were given. If you used your own equipment, paid out of pocket for supplies, or had to ask for time off, include that too. Save text messages, Slack chats, email chains or anything else that shows the reality of your working relationship.
Why it matters: California courts look at the actual nature of the work, not what the contract says. Your documentation can prove you were under employer control and thus owed employee rights.
Step #2: Save the “Independent Contractor” contract – even though it’s not legally enforceable
Even if it’s titled “Independent Contractor Agreement,” don’t toss it. Keep a clean copy of your contract and all revisions. These documents may show whether the employer tried to classify you as a contractor simply to avoid payroll taxes, not because the work relationship qualified under the law.
Pro tip: The ABC Test under California Labor Code section 2775 puts the burden on the employer to prove you were truly independent, not the other way around.
Step #3: Gather proof of employee-like treatment
Make a list of ways you were treated like a regular employee. Did they give you a company email address? Require set hours or shifts? Restrict your ability to take on other clients? Use a time clock? All of this helps prove you were an employee in practice. Also list any differences in benefits, training, or job protections compared to your coworkers who were classified as employees.
Focus especially on “B” in the ABC Test: Were you doing the core work of the business? That’s a big factor in proving misclassification.
Step #4: Talk to an employment lawyer
Do not expect your employer to admit they misclassified you. Unlike a simple payroll error, misclassification is a structural issue and employers know that if they misclassified you, they’ve likely misclassified others too. That opens them up to massive liability for unpaid wages, penalties, and interest. For that reason, most employers become evasive, defensive, or outright hostile when the topic of misclassification comes up. They’re not just denying your claim, they’re protecting their entire business model.
That’s why you need a lawyer. An experienced employment attorney who handles wage and hour cases can assess your classification, determine what you’re owed, and deliver the message in a way that your employer can’t just brush off.
Step #5: File a claim for unpaid wages
Once you’ve gathered your evidence and spoken with a lawyer about your misclassification, it’s time to decide how to move forward. There are two main ways to pursue unpaid wages in California:
Option 1: File a Claim with the California Labor Commissioner
This is often a good route for smaller claims, especially if you’re still within the three-year statute of limitations for wage violations. There’s no filing fee, and the process is designed to be accessible to workers who don’t have a lawyer.
But here’s the catch: the process is slow. It can take over a year just to get a hearing, and longer if the employer appeals. You’ll also be representing yourself unless you hire a lawyer, which means preparing evidence, making arguments, and navigating the hearing process on your own. For some, that’s manageable. For many, it’s not.
For more information on how to file a wage claim with the California Labor Commissioner, visit the Department of Industrial Relations website. It outlines the process, required forms, and what to expect after you file.
Option 2: File a Civil Lawsuit
If your claim involves significant unpaid wages, penalties, retaliation, or broader legal violations like waiting time penalties or expense reimbursement, a civil lawsuit may be the better path. This usually means hiring an employment lawyer who works on a contingency basis i.e. they only get paid if you win or settle.
The upside? Your lawyer handles everything. They build the case, negotiate with the employer, and apply pressure that can lead to a faster and more favorable result. Employers tend to take civil lawsuits more seriously than Labor Commissioner claims, especially when they’re facing legal leverage and real exposure.
For a step-by-step guide on recovering unpaid wages in California, see my blog: How Do I Resolve an Unpaid Wages Dispute in California?
Can I Get Fired for Challenging My Independent Contractor Misclassification?
Yes, and it happens, but it’s illegal. Retaliating against an employee for asserting wage rights is a violation of California law. If your employer punishes you for speaking up, you may have a separate claim for retaliation.
If you were fired after speaking up about your misclassification, read my blog: Is Being Fired After Filing a Complaint Considered Wrongful Termination?
Does California’s Fair Employment and Housing Act Apply to Independent Contractors?
FEHA protections (against discrimination, harassment, and retaliation) generally apply to employees. Independent contractors aren’t fully protected, but if you’re misclassified, then you are actually an employee (not an independent contractor) and you should be covered. It all goes back to classification. The more you’re treated like an employee, the more likely those legal protections apply to you.
To understand how California law protects workers from misclassification, retaliation, and other illegal conduct, check out my blog: FEHA: How It Protects California Employees.
FREQUENTLY ASKED QUESTIONS ABOUT INDEPENDENT CONTRACTOR MISCLASSIFICATION
What should I do if I think I’ve been misclassified as an independent contractor in California?
Start by gathering evidence about your working relationship. Misclassification isn’t about what your contract says, it’s about how you’re treated on the job. Ask yourself:
- Does the company control your schedule, tools, or how you work?
- Are you doing work that’s part of the company’s core business?
- Do you rely on this job as your main (or only) source of income?
If the answer is yes to those questions, you may be misclassified. The best next step is to talk to an experienced employment lawyer. California uses the ABC Test (Labor Code § 2775) to determine whether someone is truly an independent contractor. A lawyer can help evaluate your situation and advise whether you’re owed wages, overtime, and penalties.
Can I file a lawsuit against my employer for independent contractor misclassification in California?
Yes. If you’ve been misclassified, a civil lawsuit allows you to demand:
- Unpaid minimum wage and overtime
- Missed meal and rest break penalties
- Waiting time penalties (Labor Code § 203)
- Attorney’s fees and interest
- Additional penalties if the employer willfully misclassified you (Labor Code § 226.8)
A lawsuit is especially useful if you were fired or retaliated against after speaking up. In that case, you may also have a claim for retaliation under California law. A lawyer can help you calculate your total damages and file the claim on your behalf.
What are my legal rights if I was misclassified and didn’t receive overtime or meal breaks in California?
If you’re legally an employee under California’s ABC Test, you’re entitled to all the protections employees get, including:
- Overtime pay after 8 hours a day or 40 hours a week (Labor Code § 510)
- Meal and rest breaks (Labor Code §§ 226.7, 512)
- Reimbursement for work-related expenses (Labor Code § 2802)
- Sick leave and other benefits provided by law or company policy
If you didn’t receive those rights because your employer classified you as an independent contractor, you can demand full back pay, penalties, and interest. But you’ll need to show evidence that the classification was incorrect, which is why documenting your job conditions and speaking to a lawyer is key.
To learn more about when a missed meal period is legal, and when your employer is just breaking the law, check out my blog: Can My Employer Force Me to Waive My Meal Period in California?
Final Thoughts from Matt Ruggles About Independent Contractor Misclassification
Independent contractor misclassification is wage theft, plain and simple. If you suspect you’ve been wrongly classified and denied wages, don’t sit on it because you are being ripped off. Start documenting, get legal advice, and take steps to recover what you’re owed. Just because your employer labels you an independent contractor doesn’t make it true.
If you want help evaluating your case or recovering unpaid wages from a misclassification, contact Ruggles Law Firm.
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.
