Why is it important that I be properly classified by my employer?
When working for a company, you may be classified and “exempt” or “non-exempt” or the company may treat you as an “independent contractor.” There are several reasons why proper classification is important, both on the employer’s side and on the employee’s side.
On the company’s side, there are significant penalties that can befall an employer if they categorize someone as an independent contractor when they should have been an employee.
The legislature has ramped up the penalties that are applicable and not only can the labor commissioner go after the employer, but the employee who is misclassified as an independent contractor can sue and obtain not only penalties, overtime and other damages – they are going to be able to get their attorneys’ fees on top of it if they prevail. So, the employer is going to be paying not only their own attorney to defend the case, but also, ultimately paying the employee’s attorney for bringing it.
Another “pile on” is that the Employment Development Department (EDD) has been coming after employers who incorrectly categorizes employees as independent contractors to get back taxes, interest and penalties.
Misclassification of workers is something that can be extremely costly for an employer.
On the employee’s side, the right to receive overtime, double time, meal and rest breaks are all important issues. As is the right to receive other employee benefits such as health, dental, vision and life insurance, and equity compensation such as stock options or restricted stock units (RSUs). And it is also important that the employer pay half of the employment taxes that are otherwise borne by the individual who is misclassified as an independent contractor.
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