In the evolving landscape of the employment world, one of the most contentious issues that workers face is misclassification. When employers wrongfully categorize employees as independent contractors, they circumvent legal responsibilities, often depriving workers of benefits and protections they’re rightfully entitled to. Miracle Mile Law Group is dedicated to ensuring that every worker in Los Angeles is classified correctly and reaps the benefits that come with rightful classification.

Misclassification Under California Law


California has been a pioneer in addressing worker misclassification with its robust legal provisions. The landmark Assembly Bill 5 (AB5), which came into effect in 2020, redefined the criteria for classifying workers, centering on the “ABC test”. To classify a worker as an independent contractor under AB5, an employer must prove:


  1. The worker is free from the company’s control and direction in connection with the performance of the work.
  2. The worker performs tasks that are outside the usual course of the company’s business activities.
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.


In cases where the ABC test does not apply, the multifactor test from S.G. Borello & Sons, Inc. v. Department of Industrial Relations can be utilized. This test considers aspects like the right to discharge, the method of payment, and the nature of the work performed. The nuances of AB5 have dramatically shifted the employment landscape, compelling businesses to re-evaluate and often reclassify many independent contractors to employees. Additionally, the Labor Code Section 226.8 stipulates that willful misclassification can result in steep penalties, ranging from $5,000 to $25,000 per violation, underscoring the state’s stern stance on the issue. Attorneys, when representing misclassified workers, lean heavily on these provisions. Armed with the mandates of AB5 and Labor Code Section 226.8, along with other relevant labor codes, Miracle Mile Law Group takes on employers who have sidestepped their responsibilities, ensuring that workers receive the recognition and benefits they rightfully deserve.

Federal Safeguards Against Worker Misclassification

At the federal level, protection against worker misclassification primarily hinges on the Fair Labor Standards Act (FLSA). The FLSA establishes standards for minimum wage, overtime pay, and child labor, and its applicability is determined based on an “economic realities” test rather than a strict definition of employment. This test considers several factors to determine if a worker is economically dependent on the employer (thus an employee) or truly in business for themselves (an independent contractor). Elements of this test include the degree of control exerted by the employer, the worker’s opportunity for profit or loss, and the permanency of the working relationship. The Internal Revenue Service (IRS) also has its criteria, mainly the Common Law Test, which considers the nature and degree of control the employer has over the worker. While not explicitly a misclassification statute, the IRS’s rules can have tax implications for both workers and employers. Misclassification can result in back taxes, penalties, and interest. Additionally, other federal laws like the Family and Medical Leave Act (FMLA) and the Employee Retirement Income Security Act (ERISA) have stipulations that can be affected by misclassification. Workers and attorneys can utilize these federal provisions in tandem with state laws to challenge and rectify misclassification, ensuring workers are granted the rights and benefits they are due.

Examples of Misclassification Consequences

      1. Deprivation of Overtime: Workers misclassified might not receive overtime pay even after putting in extra hours.
      2. Lack of Benefits: Misclassified workers may miss out on health insurance, retirement contributions, and other employee benefits.
      3. Tax Liabilities: Independent contractors have to shoulder self-employment taxes, potentially increasing their tax burdens.
      4. No Workers’ Compensation: If misclassified, a worker might not be covered under the employer’s workers’ compensation insurance, leaving them vulnerable in case of work-related injuries.

Compensation for Victims of Worker Misclassification

When workers are unjustly labeled as independent contractors instead of bona fide employees, they’re often denied a slew of legal protections and benefits. If successful in a misclassification lawsuit, these workers could recover a variety of compensations. This includes back pay for unpaid overtime and minimum wages they should have earned under state and federal wage and hour laws. They could also be eligible for reimbursement for expenses that should have been borne by the employer. Additionally, they might recover missed benefits such as health insurance, retirement contributions, and even bonuses or profit-sharing they would have been entitled to as employees. Compensation could also cover the difference in taxes paid, since employees and independent contractors have differing tax liabilities. In cases where the misclassification is found to be intentional, workers might be awarded penalties under state laws, as well as interest on the unpaid wages. Moreover, if the worker faced retaliation or was terminated for raising the issue, they might be entitled to damages for wrongful termination or retaliation. Miracle Mile Law Group diligently works to ensure that misclassified workers gain the comprehensive restitution they are owed, redressing the imbalance and injustice caused by improper categorization.

Fighting Misclassification

Misclassification not only affects individual workers but undermines the spirit of employment laws designed to protect worker rights. Employers who wrongly classify workers can face hefty fines, back pay, and be required to extend benefits retroactively. At Miracle Mile Law Group, our dedicated team leverages the nuances of California laws, such as AB5, in tandem with federal regulations to advocate for workers’ rights. Every worker deserves their rightful benefits, and we stand firm in ensuring they get them.

Too often employers will classify their workers as independent contractors rather than as actual employees. They do this for a number of reasons: to avoid paying overtime, to avoid paying the mandated minimum wage, save on their taxes, avoid having to pay insurance, avoid paying worker’s compensation claims, and many other reasons. This practice is not only unfair, deceitful, and manipulative but it is also illegal. Not only is the employee disadvantaged, but the State and Federal government is also deprived of taxes the employer should be paying.

In 2018, the California Supreme Court, in Dynamex Operations West, Inc. v. Superior Court, clarified the standard to determine whether an individual is an employee or whether they are independent contractors. In doing so, the Court created a presumption that employees are not independent contractors unless the “ABC” test is met. In other words, it is the employer’s job to prove that an individual is an independent contractor. The following test must be met:

  • The worker must be free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • The worker must perform work that is outside the usual course of the hiring entity’s business; and
  • The worker must customarily be engaged in an independently established trade, occupation, or business of the same nature as the work performed.

If ANY of the above three factors are not met, then your employer has failed to show that you are an independent contractor. A misclassification lawyer will help you prove that you were entitled to wages you should have received if you have met these factors.

It is important for a number of reasons. To illustrate, let’s say you work for Corporation X for 45 hours a week for 5 years at $15 an hour. Under these circumstances you would be owed $27,000 in back pay for unpaid wages: 5 hours multiplied by $22.50 (which is the overtime rate, $15 x 1.5) multiplied by 240 weeks (5 years).

However, if you qualify as an independent contractor, you will not be owed the extra $27,000 in overtime pay. Therefore, determining whether you qualify as an independent contractor is essential in finding out whether you have a claim for back pay. Also, aside from the above listed scenario, a misclassified employee will have the following liabilities, among other things: the misclassified employee will have to pay all of their Social Security and Medicare taxes by themselves the misclassified employee will be ineligible for unemployment benefits. the misclassified employee will be ineligible for worker’s compensation benefits. the misclassified employee will have none of the workplace rights that employees usually have, such as a right to a minimum wage, overtime pay, sick pay, and rest breaks

There are a couple of remedies available to those who have wrongly been misclassified as an independent contractor when they should have been classified as an employee. Compensatory Damages: this means that the misclassified employee is entitled to the wages and overtime pay he or she should have been entitled to had the employee been properly classified.

Labor Code section 226: under this section, if your employer misclassifies you, your wage statements are in essence inaccurate. Subsection (e) of Labor Code section 226 states that “an employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.” Therefore, the employee can recover up to $4,000 in penalties on top of the overtime pay they were entitled to, plus attorney’s fees.

Labor Code section 226.8: it is illegal for your employer to willfully, or intentionally, misclassify you as an independent contractor. If he or she knows that you should not be classified as an independent contractor but still does so, you may be entitled to statutory fees. For example, Labor Code section 226.8(c) states that “the person or employer has engaged in or is engaging in a pattern or practice of these violations, the person or employer shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation, in addition to any other penalties or fines permitted by law.” In other words, the employer who is found to violate section 226.8 is subject to a fine of $10,000 to $25,000.

Labor Code section 2753: under this section, those who assist an employer in willfully misclassifying an employer as an independent contractor may be liable jointly and severally liable.

  • $227,000,000: FedEx routinely misclassified thousands of drivers and independent contractors when they should of have been classified as full-time employees. Because of the classification of drivers as independent contractors, drivers had been unable to receive many employment benefits, including sick leave. FedEx agreed to settle the case for $227,000,000.
  • $1,000,000: General Assembly, a for-profit school that teaches courses in design, business and technology skills often employed multiple instructors as independent contractors versus employees. They were denied overtime pay and rest breaks. The case settled for $1,000,000. $2,000,000:
  • Field Asset Services, a property servicing company, misclassified 11 workers and independent contractors instead of employees. The workers alleged they were denied overtime benefits and were required to pay business expenses on their own without reimbursement. Each worker received anywhere from $150,000 to $200,000 each.
  • $6,000,000: Lowe’s Home Centers were sued by a class of its home improvement contractors. The contractors claimed that they had been misclassified as independent contractors instead of employees. In essence, the individuals and businesses were hired to do improvement work for Lowe’s customers. The complaint alleged that (1) Lowe’s Production Office managed each installation project, (2)Lowe’s set the fees to be earned by each home improvement contractor, and (3) Lowe’s imposed a non-compete covenant on installers. The case eventually settled for $6,500,000.