Misclassified as a 1099 Worker? How to Reclaim Lost Wages in California

If you are working full-time for a company, following their schedules, using their equipment, and being told exactly how to complete your tasks, only to receive a 1099 form instead of a W-2 at tax time, you may be misclassified.

This scenario describes worker misclassification, a pervasive problem throughout California industries that deprives countless workers of their rightful wages and protections.

When employers incorrectly classify employees as independent contractors, they’re not just making an accounting error—they’re engaging in a form of wage theft that costs workers thousands of dollars annually while allowing companies to avoid their financial responsibilities illegally.

In California’s strict regulatory environment, understanding your employment status isn’t just about semantics—it’s about financial justice and protecting your rights. This comprehensive guide will walk you through the steps to determine if you’ve been misclassified, what compensation you may be owed, and exactly how to reclaim what’s rightfully yours under California law.

This does not address when someone is misclassified as an exempt employee instead of a non-exempt employee.

Understanding Worker Misclassification in California

What Is Misclassification?

Worker misclassification occurs when a business treats someone legally qualifying as an employee as an independent contractor. This distinction might seem bureaucratic, but it has profound implications for both workers and employers.

While independent contractors operate their own businesses and retain control over how they complete projects, employees work under the direction and control of an employer—even if that employer gives them considerable autonomy.

The ABC Test: California’s Worker Standard

In 2019, California enacted Assembly Bill 5 (AB5), which, consistent with a 2018 California Supreme Court ruling, established the “ABC test” as the primary standard for determining worker classification for most industries. This test presumes all workers are employees unless the hiring entity can prove all three of these conditions exist:

• Part A: The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact.
• Part B: The worker performs work that is outside the usual course of the hiring entity’s business.
• Part C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

You are only an independent contractor if you meet A, B, and C.  If any one of these conditions isn’t met, the worker must be classified as an employee.

For example, if you drive for a delivery company and the company sets your hours, provides the delivery app, and assigns you specific routes (failing Part A), and delivery services are the company’s core business (failing Part B), you’re almost certainly an employee regardless of what your contract says.

Worker Exceptions to the ABC Test

While the ABC test applies broadly, some professions remain subject to California’s previous standard (the “Borello test”), including:

• Licensed physicians, surgeons, dentists, podiatrists, psychologists, and veterinarians.
• Lawyers, architects, engineers, private investigators, and accountants.
• Certain direct sales professionals and real estate licensees.
• Certain licensed insurance agents, brokers and those providing some underwriting services.

Additionally, the legislature added later exemptions, including for app-based rideshare or delivery service workers and gig workers (who, through them, get certain specific benefits regarding pay).

Are You a Misclassified Worker? Key Signs to Watch For

Many workers don’t realize they’ve been misclassified until they try to access unemployment benefits, file a workers’ compensation claim, or examine their tax responsibilities.

You should make sure you are aware of your status as soon as possible (including if you complete a W4 or W9 form with initial paperwork you complete when starting work or shortly thereafter).  If you believe they are classifying you as an independent contractor (i.e. W9 form competed), watch for these red flags that may indicate misclassification:

Behavioral Control Indicators

• The company directs your schedule, hours, or sequence of work.
• You receive specific instructions on how to complete tasks.
• You undergo training or supervision from the company.
• Your performance is evaluated on how work is completed, not just results.

Financial Relationship Factors

• The company provides tools, equipment, or software necessary for the work.
• You aren’t allowed to work for multiple companies or clients.
• You’re paid by the hour or week rather than by project.
• You can’t realize a profit or loss from your work.

Integration and Dependency

• You perform work that is core to the company’s business (e.g., a driver for a delivery company).
• Your relationship is ongoing rather than project-based.
• You work exclusively or primarily for one company.
• You’re economically dependent on this single relationship.

What Have You Lost in Wages? Understanding Your Damages

You lose access to critical workplace protections and compensation when you’re misclassified as an independent contractor. The financial impact can be substantial—often totaling thousands of dollars per year in lost wages and benefits.

Types of Compensation You May Recover

1. Unpaid Overtime: Non-exempt employees in California are entitled to 1.5 times their regular rate for hours worked beyond 8 in a day or 40 in a week, and double time for hours beyond 12 in a day. If you are misclassified and work more than these hours without an increase in pay to the overtime rate, you may recover these wages plus interest.
2. Unpaid Minimum Wage: If your effective hourly rate (project pay divided by hours worked) falls below California’s minimum wage, you may recover the difference. You may also be able to recover for hours where you performed work, but it was not paid because you were treated as an independent contractor. For each, you may be entitled to liquidated damages (so essentially double the minimum wages owed) plus interest.
3. Meal and Rest Break Premiums: You may not be getting your required meal periods and rest breaks. For a missed meal break, you’re owed one additional hour of pay at your regular rate (capped at 1 additional hour per day). The same applies to rest breaks.
4. Reimbursement for Business Expenses: If you’ve paid for tools, equipment, mileage, used your own vehicle or cell phone for work, or other costs that your employer should have covered, you can recover these expenses.
5. Penalties for Wage Statement Violations: Employers must provide accurate, itemized wage statements. If your employer fails to provide an accurate wage statement, which is likely the case if you are considered an independent contractor, you have the right to recover damages.
6. Waiting Time Penalties: If your employment ends and your final wages aren’t paid immediately, you may be entitled to penalties of up to 30 days’ wages.
7. Willful Misclassification Penalty: The penalty for this, which you are entitled to if misclassified per statute, is between $5,000 and $25,000.

Don’t Let Misclassification Rob You of What You’ve Earned

Don’t let being misclassified take away what you’ve worked for. Misclassifying workers isn’t just a paperwork mistake; it’s a serious crime that takes away the rights and earnings of hard-working Californians.

The financial effects can be terrible, costing workers thousands of dollars in lost pay, benefits, and future security. But you don’t have to put up with this unfairness. California has some of the best laws in the country to protect workers.

California has some of the strongest worker protection laws in the nation. By reclaiming your lost wages, you’re not just standing up for yourself—you’re helping to create a fairer and more equitable workplace for all workers.

If you suspect you’ve been misclassified, remember:

• You have rights regardless of what your contract says
• Documentation is your most powerful tool
• Legal help is available, often on a contingency basis
• Retaliation for asserting your rights is illegal

Take action today—consult with an experienced California employment attorney at Bisnar Chase to reclaim what you’ve rightfully earned. Your work has value, and so do your rights. Contact us for a free consultation with no obligation.