1099 But Treated Like an Employee? Independent Contractor Misclassification in California
Your employer calls you an independent contractor. You receive a 1099 instead of a W-2. Maybe you even signed an agreement saying you are a contractor.
But your employer tells you when to report to work, controls what you do, supervises how you do it, and expects you to perform the same work the company provides to its customers.
So are you really an independent contractor?
In California, the answer does not depend simply on what your employer calls you. A 1099, an independent contractor agreement, or the fact that taxes are not withheld from your paycheck does not by itself determine whether you are an independent contractor. California generally looks at the actual working relationship.
KEY TAKEAWAYS
- Receiving a 1099 does not automatically make someone an independent contractor.
- California generally presumes a worker is an employee unless the hiring entity can satisfy the applicable legal test.
- Under the ABC test, the company ordinarily must satisfy all three parts of the test.
- A misclassified worker may potentially be owed overtime, minimum wages, meal and rest period compensation, expense reimbursement, and other amounts depending on the facts.
A 1099 Does Not Decide Whether You Are an Employee
One of the most common misconceptions about worker classification is that receiving a 1099 settles the issue.
It does not.
California’s Labor Commissioner specifically explains that a worker does not become an independent contractor merely because the worker signed an agreement using that title or because the company issued a 1099 instead of a W-2.
The important question is how the relationship actually operates.
Ask yourself:
Does the company set your schedule?
Are you performing the same type of work the company sells to its customers?
Do supervisors tell you how the work must be performed?
Do you depend primarily on one company for your work?
Are you really operating your own independent business, or are you working like everyone else at the company, except that you happen to receive a 1099?
Those facts may matter considerably more than the title printed on your paperwork.
California’s ABC Test
For many California workers, classification begins with what is known as the ABC test.
The starting presumption is that the worker is an employee. The hiring entity must generally establish all three of the following:
A — The worker is free from the company’s control and direction.
This applies both to what the written contract says and what actually happens on the job.
B — The worker performs work outside the usual course of the company’s business.
This is an important part of the test.
A plumbing company hiring an outside accountant to prepare its tax returns looks very different from a plumbing company regularly sending supposed “independent contractor” plumbers to perform plumbing jobs for its customers.
C — The worker is customarily engaged in an independently established business of the same type.
Someone genuinely operating an independent business may have other clients, advertise services, negotiate rates, supply equipment, and make the business available to the general public.
The hiring entity generally must satisfy all three parts of the ABC test. Failure on one part can result in employee status under that test.
Know Your Rights
The name placed on your contract does not control your employment status. California looks beyond the paperwork and examines the actual relationship between the worker and the company.
The “B” Part Can Be Particularly Important
Consider two workers hired by a bakery.
The bakery hires an electrician to repair a damaged electrical panel. Electrical repair is not what the bakery sells to its customers.
Now suppose the bakery regularly hires cake decorators as “independent contractors” to decorate the cakes it sells.
Those relationships look very different.
California’s own guidance uses similar examples to explain why a worker performing the company’s ordinary business may fail the second part of the ABC test.
That is why classification cases frequently require more than simply asking whether the company “controlled” the worker.
Signs You May Have Been Misclassified
No single fact necessarily resolves every classification case, and exceptions to the ABC test exist. But several facts may justify taking a closer look:
- You work primarily or exclusively for one company.
- The company sets your schedule.
- The company assigns your daily jobs.
- You cannot meaningfully negotiate your rate.
- Supervisors direct your work.
- You perform the same work as W-2 employees.
- Your services are a central part of the company’s business.
- You do not advertise an independent business to the public.
- You do not maintain your own customer base.
- The company can discipline or terminate you like an employee.
- You are paid hourly, daily, weekly, per route, or per job but have little actual business independence.
None of those facts should be considered in isolation. The entire working relationship matters.
What If an Exception to the ABC Test Applies?
This is where worker-classification cases can become more complicated.
California has statutory exceptions for certain occupations and business relationships. When an exception applies, another standard—often the multi-factor Borello test may determine employment status instead.
An “exception from the ABC test” also does not necessarily mean the worker automatically becomes an independent contractor. It frequently means a different test must be applied.
That distinction is important.
What Can a Misclassified Employee Be Owed?
Misclassification can affect considerably more than the name appearing on a tax form.
True employees receive protections that independent contractors generally do not receive under California wage-and-hour laws. Those protections may include minimum wages, overtime, meal periods, rest periods, and other employment protections.
Depending on the circumstances, a misclassified worker may have claims involving:
Unpaid overtime.
A worker may have routinely worked more than eight hours in a workday or 40 hours in a workweek without receiving overtime compensation.
Meal and rest periods.
A supposed contractor may have worked employee-style shifts without lawful meal or rest periods.
Unpaid minimum wages.
After accounting for all hours worked, some piece-rate or flat-rate arrangements may result in wages below the applicable minimum.
Business expenses.
Employees may also have rights concerning necessary business expenses that contractors were expected to absorb themselves.
Other wage-related remedies.
Depending on the facts, additional wage, wage-statement, waiting-time, interest, or statutory remedies may need to be evaluated.
Example: The “Independent” Delivery Driver
Suppose a delivery company classifies a driver as an independent contractor.
The driver works five or six days each week. The company provides the route, dictates when packages must be delivered, monitors the driver’s performance, requires compliance with company procedures, and can remove the driver from routes.
The driver performs the exact service the delivery company sells to customers.
The driver also has no meaningful customer base or delivery business outside this company.
The fact that the driver receives a 1099 does not end the analysis. Those facts raise significant classification questions that should be evaluated under the applicable California test.
What Evidence Should You Save?
Worker-classification cases often turn on the details of the relationship.
Save materials showing how the job actually worked, including:
- Independent contractor agreements
- 1099 forms
- Pay records Schedules
- Text messages
- Emails
- Work instructions
- Company policies
- Route assignments
- Timekeeping records
- App screenshots
- Records of hours worked
- Expense records
- Names of coworkers or supervisors familiar with the arrangement
Do not assume the contract tells the entire story.
What Can You Do If You Were Misclassified?
California workers who believe they were improperly classified may be able to pursue a wage claim with the Labor Commissioner or pursue a civil action, depending on the circumstances. The Labor Commissioner expressly accepts wage claims involving alleged independent-contractor misclassification.
Timing matters. The Labor Commissioner identifies a three-year filing period for many claims involving minimum wages, overtime, meal and rest periods, and unpaid reimbursements, although different claims and procedures can have different deadlines.
Waiting to investigate the issue can result in the loss of older claims.
How GS LAW Can Help
Independent contractor cases are rarely resolved by simply looking at whether a worker received a W-2 or 1099.
GS LAW, APC evaluates how the job actually operated, including the company’s business, the worker’s daily duties, the level of control exercised by the company, whether the worker operated an independent business, the hours worked, and the wages and expenses that may be recoverable if the worker was misclassified.
If you believe you were called an independent contractor but actually worked as an employee, we can evaluate your classification and potential wage claims.