Can misclassification rob employees of overtime pay?

California, known for its stringent labor laws, has established strong safeguards to help protect workers’ rights, including measures aimed at protecting fair compensation and minimizing unlawful treatment in the workplace.

One crucial aspect of these regulations is overtime pay, which provides employees additional compensation for working beyond their standard hours. However, the intentional or unintentional misclassification of employees as exempt or independent contractors can lead to a significant loss of rightful overtime pay entitlements, despite regulations in place designed to keep such losses from occurring.

How misclassification affects overtime pay

The state’s labor laws mandate that eligible employees are entitled to overtime pay for any hours worked beyond the standard 8-hour workday or 40-hour workweek. Overtime pay is typically set at one and a half times the employee’s regular hourly rate, while double the regular rate applies for hours worked beyond 12 hours in a single workday. This provision incentivizes employers to manage their workforce efficiently and helps to ensure that employees are fairly compensated for extra hours.

Misclassification occurs when employers incorrectly label their employers as independent contractors. This distinction may seem trivial, but it has significant ramifications for any affected workers who may not receive the overtime pay (and other legal protections) they are entitled to under the law. This is because independent contractors are not entitled to the same labor protections as employees, such as:

• Minimum wage
• Overtime pay
• Meal and Rest Break
• Sick Pay
• Unemployment insurance
• Workers’ compensation

Thankfully, California authorities have taken steps to protect workers’ rights due to the impact of employee misclassification. In September 2019, the state enacted Assembly Bill 5 (AB5), establishing a stricter test for determining whether a worker should be classified as an independent contractor or employee. AB5 also expanded the application of the ABC test to make it more difficult for employers to misclassify workers. You may be misclassified if you perform work that is within the line of work performed by your employer or within the employer’s  usual course of business.

Denying employees overtime pay affects their financial stability and undermines the principles of fair labor practices. If you believe that you have been misclassified as an independent contractor or you are otherwise concerned that you’re being owed compensation that is rightfully yours, chances are that California law is on your side. Consider seeking legal guidance for greater clarity.