Understanding Employee Classifications 

Do you know the difference between being an ‘employee’ and an ‘independent contractor’, and which one you actually are? That distinction matters more than many realize. Your classification affects your pay, benefits, legal protections, taxes, unemployment insurance, workers’ compensation, overtime rights, and more. Too often in San Diego and across California, employers deliberately misclassify workers to avoid their responsibilities and reduce business costs. That practice is illegal, and you deserve to know your rights. 

At The Gould Firm, we believe knowledge is power. We want you to understand how classifications work, recognize when your rights may be violated, and know when it’s time to seek legal help. We offer free consultations to help you gain clarity on your status without any commitment or risk. Let us help you protect your rights. 

Why Employee Classification Matters 

Your classification is not just semantics; it determines whether you get core rights and protections under the law. Some of the consequences of misclassification include: 

• No wages and overtime protections: Full-time employees in California are entitled to overtime pay, minimum wage, and rest/meal breaks under the California Labor Code (https://leginfo.legislature.ca.gov/faces/codesTOCSelected.xhtml?tocCode=LAB&tocTitle=+Labor+Code+-+LAB), but independent contractors do not have these protections. 
• Missed benefits and employer contributions: Employees often receive benefits like health insurance, retirement plans, and paid leave, which independent contractors usually miss out on. 
• No access to unemployment insurance: Employees pay into unemployment insurance and can claim benefits if they lose their job; independent contractors generally cannot. 
• Limited workers’ compensation coverage: Employees injured on the job are typically covered by workers’ compensation, while independent contractors often are not. 
• Tax withholding and contributions: Employers withhold income tax, Social Security, and Medicare for employees, but misclassifying a worker as an independent contractor shifts these tax responsibilities to the worker. 
• Fewer legal protections: Employees have protections against wrongful termination, discrimination, whistleblower retaliation, and are covered by laws such as FMLA/CFRA. Independent contractors usually lack these legal safeguards. 

Because misclassification can strip workers of hundreds or thousands of dollars in benefits, wages, and protections, many employers rely on confusion or fear of retaliation to keep workers silent. That’s why we believe California workers should know their rights and when to speak up. 

Types of Employment Classifications Under California Law 

In California, you may fall into one of several categories. Different categories carry different rights. 

1. Traditional (W2) Employee 

How to identify if you fall in this classification:  

• You are under the direction and control of the employer (e.g., they set your work hours, tools, and process). 
• Employer typically withholds taxes and treat you as a full or part-time staff member. 
• You enjoy all applicable employment law protections: wages, overtime, benefits, workers’ comp, discrimination protections, etc. 

Some examples of traditional (W2) employees typically include office workers, retail associates, teachers, administrative assistants, and factory workers. 

2. Salaried Exempt Employee 

How to identify if you fall in this classification:  

• You are an employee exempt from overtime under specific tests (duties, salary basis, etc.). 
• You are still an employee and retain protections other than overtime/meal break rules (depending on classification). 

Some examples of salaried exempt employees typically include managers, professional engineers, software developers, marketing directors, and corporate lawyers. 

3. Independent Contractor 

How to identify if you fall in this classification:  

• Generally, an independent contractor is someone who is hired to perform a distinct job, with more autonomy in how, when, and where they perform the work. 
• You are usually responsible for your own taxes, benefits, and insurance. 
• You do not receive the same protections as employees. 

Some examples of independent contractors typically include freelance writers, graphic designers, consultants, delivery drivers, and IT specialists. 

4. Hybrid or Gig Workers / Misclassified Contractors 

How to identify if you fall in this classification:  

• Sometimes employers treat workers as contractors while retaining many controls typical of employment. 
• This misclassification is illegal when specific legal tests (like the ABC test) are not met. 

Recognizing your actual status is crucial, as many workers are misclassified by employers seeking to cut costs and are often unaware of this. 

California’s ABC Test for Independent Contractors 

California law uses a strict test to determine whether a worker is correctly classified as an independent contractor. This is often called the ABC test (codified under Labor Code Section 2750.3). Under this test, a worker is presumed to be an employee unless the employer proves all three of the following conditions: 

(A) Absence of Control: The worker is free from the control and direction of the hiring entity in the performance of the work, both under contract and in fact. 

(B) Business Uniqueness: The work performed is outside the usual course of the hiring entity’s business. 

(C) Independent Trade / Customarily Engaged: The worker is customarily engaged in an independently established trade, occupation, or business of the exact nature as the work performed. 

If any one of those prongs fails, the worker must be classified as an employee. That means all the rights and protections of employees apply. Many misclassification disputes hinge on showing the employer failed one or more prongs. 

Because the ABC test is quite strict, many contractors are misclassified. Employers often insist “you’re a contractor,” but if they control your hours or methods, or your work is integral to their business, they may have misapplied the test, preventing you from invoking your rights. 

Common Signs of Misclassification 

Misclassification can be hard to spot, but these red flags often signal trouble: 

• You do work similar to employees, under their supervision. If you punch a time clock, take direction, are included in staff meetings, or do duties that staff do, that signals employment. 
• You lack an independent business presence. No advertisements, no business licenses, no separate clients; just one “employer” telling you when, where, and how. 
• You are provided with tools, equipment, software, and a uniform. Independent contractors typically provide their own. 
• You have no control over the schedule or method. If your “employer” determines your hours, assignments, or methods, that undermines independent control. 
• You are paid by the job, not by hours or overtime, with no wage statements. Lack of wage statements, pay stub deductions, or overtime protections is suspect. 
• You cannot subcontract or hire assistants. These rigid restrictions on delegation point to an employment relationship. 
• Absence of a contract or a broad one-sided “contractor agreement” labeled “contractor”. Simply labeling someone as a contractor is insufficient if the factual relationship shows employment. 

How Misclassification Hurts Workers 

• Loss of overtime pay, minimum wage, meals, and rest breaks 
• Loss of employer contributions to benefits, retirement plans, and insurance 
• Denial of unemployment or workers’ compensation claims 
• Exposure to full tax burdens and late penalties 
• Lack of access to legal protections (wrongful termination, discrimination rights) 

Misclassification shifts costs and risks onto workers while saving money for employers. This is not only unfair, but it is also unlawful. 

Your Legal Rights When Misclassified 

If you believe you’ve been misclassified, you may pursue legal remedies. Under both California and federal laws, you have the right to pursue unpaid wages, overtime pay, meal and rest breaks, and applicable penalties as outlined in the California Labor Code. You may also be entitled to recover benefits that were wrongfully denied, such as health insurance, retirement contributions, and payroll benefits, depending on the timeline and employment structure. The California Labor Commissioner has the authority to investigate claims of worker misclassification. Through unpaid wage claims, you may seek liquidated damages, civil penalties, and other statutory penalties. In certain situations, you may have the option to file a private lawsuit to recover additional damages and penalties. 

How The Gould Firm Helps You Pursue Compensation 

We begin with a thorough case evaluation and classification analysis, carefully reviewing the facts of your work relationship and comparing them against the ABC test to determine if misclassification likely occurred. We assist by filing demand letters and administrative claims with the California Labor Commissioner, the wage and hour division, or other regulatory agencies. If necessary, we will initiate litigation on your behalf to recover unpaid wages, benefits, penalties, and associated costs. When misclassification affects multiple workers, we are prepared to pursue collective or class action remedies to maximize recovery. Beyond litigation, we advocate for systemic change by encouraging employers to adopt lawful classification practices, ensuring fair treatment for workers moving forward. We aim to make the process understandable and manageable. Many workers hesitate because they feel powerless or risk retaliation. Our job is to stand by you and fight your case strategically. 

Know Your Rights and Contact Gould Firm   

Classification may look like a technical term, but it determines whether you get the protections and compensation you deserve. Employers, especially in San Diego and California, sometimes misclassify workers precisely because many won’t challenge it. That’s unacceptable and illegal. 

To ensure you are fully aware of your status, know when your rights are violated, and act when necessary, you should consult with a member of our team. We are here to help you understand, assert, and enforce those rights. We offer free consultations to review your position, explain possible claims, and advise on the next steps. 

If you suspect you have been misclassified, or if you’re unsure whether your classification is correct, reach out today. You deserve clarity, accountability, and the protections that California law affords. Let us help you get what you’re owed and ensure this wrong does not go unchallenged.