A recent California regulation requires that employers consider all employees working under the direction and supervision of an employer as “W-2” employees rather than an independent contractor, unless there is a legal exemption. Based on the new statute, AB5, most of the categories of employees previously classified as independent contractors must now be classified as W-2 employees. This will now require employers to pay taxes and social security contributions.
Under the new legislation effective from Jan 2020, there is a presumption that individuals who work for employers are now W-2 employees. In order to not be considered as an employee, the employer has to satisfy of a three-part test:
1) the employee was not subject to the employer’s direction and control;
2) the employee performed work that was within the usual course of the employer’s business; and
3) the employee was customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
If the employer cannot satisfy any prong of this test, then the individual must be considered as a W-2 employee rather than a 1099 independent contractor. Once an individual is reclassified as a W-2 employee, then the employer has a legal duty to reimburse the employee for all the meal, rest breaks and pay the overtime. The employee becomes subject to wage and hour regulations.
Often employers would rather not pay the employer’s portion of taxes and consider those working for them as an independent contractor. This creates an unfair advantage to the employee and employer. If you have been classified as an independent contractor, you might have a valid claim against your employer. Please contact our team of experienced attorneys at Employment Rights Law Group, APC today to discuss your case. Our team of attorneys will be happy to discuss your case and see whether you have been misclassified from the beginning.