[COLUMN] Misclassification as independent contractors harms workers

JAMES Karl signed a sales associate agreement classifying him as an independent contractor with Zimmer Biomet Holdings, Inc. a company that designs, manufactures, and markets medical products. Karl sold orthopedic devices in the San Francisco Bay Area. He and his team were paid by commissions. Karl’s time was spent primarily on demonstrating the products, setting them up, and assisting the doctors who use them

Karl filed a class action lawsuit against Zimmer in federal court alleging that he and his fellow sales associates in California were misclassified as independent contractors. Because of the misclassification, Zimmer failed to pay them overtime wages, meal and rest break premiums, and reimbursements for necessary business expenses. After a series of complex procedural setbacks and triumphs, the parties eventually agreed to settle the case. Zimmer has agreed to pay class members approximately $7.4 million.

When Assembly Bill 5 became the law in California, it was intended to deter businesses from engaging in misclassification of independent contractors. The new law states that a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that:

1)            the person is free from the control and direction of the hiring entity in connection with the performance of the work;

2) the person performs work that is outside the usual course of the hiring entity’s business; and

3) the person is customarily engaged in an independently established trade, occupation or business.

Even if workers sign an agreement that labels them as independent contractors (IC), this agreement may not be enforced by the courts if an actual employment relationship can be demonstrated between the worker and the hiring entity. Employment status is determined by law, not by the parties’ agreement. This is for the protection of workers.

Independent contractors are not employees and do not have employee rights or protections. Below are the disadvantages of being an independent contractor:

  • No right to minimum wage
  • No right to overtime pay for working more than 8 hours per day or 40 hours per week
  • No right to be reimbursed for business-related expenses
  • No right to meal breaks and rest breaks during work
  • No right to the employer’s share of the social security, unemployment and disability taxes (and you cannot collect these benefits if you are fired or laid off)
  • No workers’ compensation protection if you get injured at work
  • Not entitled to additional benefits such as sick pay, retirement and profit-sharing plans
  • No protection from discrimination
  • No protection from wrongful termination of employment

Even if AB 5 continues to be challenged, California courts engage in a fact-centered analysis to determine worker’s status. A worker is likely not an independent contractor if the employer retains the right to control the worker’s manner and means of performing the job.  If the employer  directs the employee on what tasks to accomplish and how to accomplish them then the worker is likely an employee. Classifying them as independent contractors violates the law.

Employees misclassified as ICs lose big time – in money and legal protection. Thus, workers classified as ICs should carefully examine the nature of their working relationship with their companies. If they are really employees, they are entitled to back wages, reimbursements for expenses, and the value of employment benefits such as health insurance, retirement or pension benefits. Knowing your rights at work makes a lot of difference.

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The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of the Asian Journal, its management, editorial board and staff.

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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com. [C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a Presidential Awardee for Outstanding Filipino Overseas in 2018.]

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