Top 4 Independent Contractor Misclassifications in California
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In California, independent contractor misclassification is one of the most widespread wage violations, and it often costs workers thousands in lost protections. Under Labor Code § 2775 (AB 5), most workers must be classified using the ABC test, while certain occupations still fall under the Borello test.
The most common misclassifications occur in gig economy jobs, construction, frontline service roles, and professional freelance work. This guide explains how these misclassifications happen, and how workers can recognize, challenge, and recover what they’re owed.
Independent contractor status can offer flexibility, but only when it’s used correctly. In California, many workers are labeled as contractors when the nature of their job clearly makes them employees. This misclassification strips workers of overtime pay, meal and rest break protections, necessary reimbursements, and other legal rights.
Understanding how and why independent contractor misclassification happens is the first step toward protecting yourself. Here, we break down the four most common misclassification issues workers face. Read, and if you are facing any of the issues, consider taking legal action.
What Is an Independent Contractor Misclassification?
Independent contractor misclassification occurs when an employer classifies a worker as a “contractor” even though, under the law, the worker functions as an employee. This distinction matters because employees receive protections and benefits that contractors do not.
Employees are entitled to overtime pay, minimum wage, meal and rest breaks, expense reimbursements, unemployment insurance, workers’ compensation, payroll tax contributions, and full protection under California labor laws.
Contractors, on the other hand, are responsible for their own taxes, lack wage protections, and do not receive these benefits.
Because the financial difference is so significant, some companies, intentionally or not, misclassify workers to cut costs.
To address this problem, California strengthened its laws through AB 5, now written into Labor Code § 2775, which makes the ABC test the main standard for deciding whether a worker is an employee.
Under this test, most workers are presumed to be employees unless the employer can prove all three prongs of the test.
However, many industries and professions are exempt from AB 5 and must be evaluated using the older Borello multi-factor test, which looks at how much control the employer has over the work and the overall nature of the working relationship.
Understanding how both the ABC test and the Borello test operate is essential before identifying the most common types of misclassification in California workplaces.
How California Determines Worker Status
California follows mostly the ABC test and the Borello test to determine whether someone is an employee or contractor. Let’s understand these 2 tests comprehensively.
The ABC Test (Labor Code § 2775)
California uses the ABC test to decide whether a worker is an employee or an independent contractor, and most workers fall under this standard. To treat someone as a contractor, the employer must prove all three parts of the test:
- The worker is free from the company’s control,
- The work they do is outside the usual course of the business, and
- The worker runs an independently established business of the same kind.
Even if one of these elements is not met, the worker is legally an employee and entitled to full wage protections. Workers who suspect misclassification should consult an employment law attorney to review their job duties and determine whether they’re owed unpaid wages or other compensation.
The Borello Test
Some industries don’t fall under the ABC test at all and must instead be evaluated under the Borello standard in California, established in S.G. Borello & Sons, Inc. v. Department of Industrial Relations.
The Borello test looks at multiple factors to determine whether a worker is truly independent, with the main focus on how much control the company has over the work.
Courts consider whether the employer directs how the job is done, whether the work is part of the company’s regular business, who provides the tools or equipment, whether the worker can make a profit or suffer a loss, whether special skills are required, and whether the working relationship is short-term or ongoing.
Even though Borello is more flexible than the ABC test, it still classifies many workers as employees once the actual working conditions are examined.
The factors often reveal that the employer holds significant control, that the work performed is central to the business, or that the worker lacks true independence, signs that point toward employee status.
You can check out the California DIR for a better understanding. Workers who suspect they’ve been misclassified are recommended to consult a professional wage-and-hour attorney to understand which test applies to their industry and what rights, wages, or benefits they may be missing.
California’s Top Independent Contractor Misclassifications
Below are the four most frequent and legally significant forms of worker misclassification in California.
1. Gig Economy & App-Based Workers
One of the most frequent misclassifications in California today involves gig-economy workers, especially rideshare drivers, delivery workers, and app-based service providers.
Even though some companies received limited exemptions under Proposition 22, misclassification remains widespread because most gig workers do not meet the ABC test.
These workers are heavily controlled through apps, rating systems, routing tools, and assignment algorithms. They also perform work that is at the heart of the company’s business, driving, delivering, or completing tasks, and very few operate their own independently established businesses.
When gig workers are treated as contractors instead of employees, they lose important legal protections such as overtime pay, reimbursement for mileage, phone use, and work expenses under Labor Code § 2802, minimum wage guarantees, paid sick leave, workers’ compensation benefits, rest and meal break premiums, and unemployment insurance. These losses add up quickly, especially for full-time drivers or delivery workers who rely on this work to support themselves.
2. Construction Workers
Construction is one of the industries where misclassification happens most often, and the impact on workers can be severe.
Many construction laborers are told they must work as 1099 contractors, even though their day-to-day responsibilities clearly resemble those of employees.
Supervisors usually direct how the work is done, workers follow strict schedules, and they use the company’s tools, materials, and safety equipment. The work they perform is also central to the company’s business; another strong sign of employee status.
Under AB 5, most construction workers should be classified as employees unless a subcontractor relationship meets the narrow and detailed requirements listed in Labor Code § 2776.
When construction workers are misclassified, they lose important protections like prevailing wage on public projects, overtime, meal and rest breaks, workers’ compensation coverage, safety benefits, and unemployment insurance.
As a result, many workers only learn how much they are owed after speaking with an experienced labor law attorney, who review time records, pay practices, and job duties to uncover unpaid wages and penalties.
3. Hospitality, Retail & Warehouse Workers
Many businesses try to cut costs by calling frontline workers “independent contractors,” even when the reality of the job shows otherwise. These workers usually use the company’s tools or equipment, follow fixed schedules, wear uniforms, and follow detailed company procedures.
They also cannot subcontract their work or operate like a true independent business. These conditions place workers firmly within the company’s regular operations, meaning the classification fails the B prong of the ABC test, which requires that the work be outside the usual course of the employer’s business.
When frontline workers are misclassified, they miss out on important legal protections, including overtime pay, minimum wage guarantees, break premiums under Labor Code § 226.7, reimbursements for work-related expenses, and accurate wage statements required by Labor Code § 226.
Many also experience subtle or direct retaliation when they raise concerns about their status or pay. In these situations, workers may have additional legal claims, and speaking with an experienced employment attorney can help them understand their options and the full extent of what they may be owed.
4. Administrative, Professional, & Creative Workers
Professional and creative fields see high rates of misclassification, even though some roles qualify for exemptions under AB 5. In these industries, the Borello test still determines whether a worker is truly an independent contractor.
Misclassification is especially common in areas like graphic design, IT consulting, marketing, accounting, photography, videography, freelance administrative support, and certain healthcare services.
Many companies classify these workers as contractors while still exercising significant control, setting fixed hours, directing workflow, supplying equipment, or restricting outside clients. When that happens, the relationship meets the definition of employment under the Borello standard, not independent contracting.
While handling misclassification cases, our veteran workplace retaliation lawyers see that employers use independent contracting to harass, discriminate, and wrongfully terminate employees, and take proper action with evidence to provide employees justice.
Professional and creative fields see high rates of misclassification, even though some roles qualify for exemptions under AB 5. In these industries, the Borello test still determines whether a worker is truly an independent contractor.
How Misclassifications Harm Workers
When a worker is misclassified as an independent contractor, the losses go far beyond a job title; misclassification strips away core protections that California law promises employees.
A misclassified worker loses overtime and minimum wage guarantees under Labor Code § 510 and Labor Code § 1194, meaning long hours never receive the higher pay required by law.
They lose guaranteed meal and rest breaks under Labor Code § 226.7 and Labor Code § 512, which often leads to fatigue, burnout, and additional unpaid wages.
The financial burden of the job shifts onto the worker. Under Labor Code § 2802, employees must pay for mileage, cell phone use, tools, uniforms, and other business expenses themselves.
Misclassified workers lose access to vital safety-net benefits. Employees automatically qualify for workers’ compensation if injured and unemployment insurance if their job ends; contractors do not.
They miss out on legally required wage statements under Labor Code § 226, making it harder to track unpaid time or improper deductions.
If a worker is not treated as an employee, they also lose eligibility for waiting time penalties under Labor Code § 203 when final wages are late. And because the law does not treat contractors as employees, they lose protections against wrongful termination, discrimination, and retaliation, leaving them vulnerable even when mistreated.
Many workers do not realize the financial impact until an attorney reviews their hours, pay records, and expenses. Once evaluated under the correct legal standards, workers often discover that they are owed far more than they ever expected.
Are You Misclassified as an Independent Contractor? Step-by-Step Guide
Follow these 5 steps to legally claim what you owe.
Step 1: Gather all documents
Collect anything that reflects how you were paid or supervised, pay stubs, 1099s, invoices, schedules, timesheets, job instructions, emails, text messages, and company policies or handbooks. These records help show whether you were treated like an employee, even if the company called you a contractor.
Step 2: Write down how the company controlled your work
Make notes about how your job actually operated. Include things like fixed work hours, required check-ins, supervisor oversight, company rules you had to follow, uniforms, tools or equipment the company provided, and whether you needed approval before taking time off or working for someone else. Control is a major factor under both the ABC test and the Borello test.
Step 3: Ask the employer about your classification
You can ask how they decided you were a contractor and which test they used to classify you. Many employers give vague answers or none at all, but their response or refusal can still help support your claim.
Step 4: Speak with an experienced employment attorney
Once you have your records, talk to an experienced employment discrimination attorney who handles misclassification and wage-and-hour cases. These cases often involve more unpaid compensation than workers realize.
They can calculate potential damages such as unpaid overtime, meal and rest break premiums, unreimbursed expenses, inaccurate wage statements, waiting time penalties, and interest. In many cases, workers can also recover attorneys’ fees.
Step 5: Take action early
The sooner you gather evidence and get legal advice, the easier it becomes to prove misclassification and recover the full amount you are owed under California law.
Fight for Your Rights with Setareh Law Group Experts
Misclassification is one of the most widespread wage violations in California, and Setareh Law Group has spent decades standing up for workers who were wrongly labeled as independent contractors.
When companies use 1099 classifications to avoid paying overtime, providing benefits, reimbursing expenses, or honoring basic workplace protections, it leaves workers without the rights the law promises them. We have secured millions of dollars for employees who were denied proper wages, meal and rest breaks, overtime pay, and other protections because of misclassification.
Our expert attorneys are available 24/7, and workers can share their worries through a call, text, or submit a form whenever they need help. Every consultation is free, confidential, and offered in English or Spanish, so people can reach out comfortably and get answers without pressure.
Setareh Law Group experts handle a wide range of employment cases, including misclassification, wage theft, break violations, unpaid overtime, unreimbursed business expenses, wrongful termination, workplace retaliation, and large-scale class actions.
We have extensive experience fighting for California workers, and our results reflect a long history of dedication and success. If you need help and support, don’t wait longer or hesitate, contact us today.
Contact us today:
📞 Phone: 310-349-3705
✉️ Email: help@setarehlaw.com
🌐 Address: 420 N Camden Dr, Beverly Hills CA, 90210
Frequently Asked Questions
1. How do I know if I’m misclassified?
If the company controls your schedule, directs how you do your work, or if your job is part of the company’s main business, you may be an employee under the ABC test. A 1099 or contractor label doesn’t decide your status; your day-to-day work does.
2. What can I recover if I was misclassified?
Misclassified workers can recover unpaid overtime, minimum wage differences, break premiums, reimbursements, paystub penalties, waiting time penalties, and attorneys’ fees. The total amount owed is often far higher than workers expect.
3. Can a contractor become an employee later?
Yes. If your duties change or the company gains more control over your work, you may become an employee under the law, even if you started as a contractor.
4. Is retaliation illegal if I raise misclassification concerns?
Yes. It’s unlawful for an employer to punish you for asking about your classification or pay. Retaliation, like cutting hours, firing, or mistreatment, can lead to additional legal claims.
5. Does being given a 1099 automatically make me a contractor?
No. A 1099 is just a tax form. What matters is how the work is performed in reality. If you function like an employee, the law may classify you as one regardless of paperwork.
Resources
- https://leginfo.legislature.ca.gov
- https://www.dir.ca.gov
- https://www.irs.gov
- https://www.labor.ca.gov
- https://vig.cdn.sos.ca.gov
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