Independent contractors are not entitled to overtime pay. However, some employers may misclassify you as an independent contractor, yet in reality, you are an employee. In such a scenario, you will be entitled to overtime. The primary role of Workers Compensation Attorney Law Firm is to ensure that none of your legal rights are violated at the workplace, including the right to overtime. If you think that your employer hasn’t paid you overtime and you deserve it, get in touch with us today. We will ensure that you get what you deserve, provided that you are based in Los Angeles.
What is Overtime?
Before you claim your overtime payment, you must first understand what overtime is. The requirement for employers to pay their workers overtime is laid out in the Fair Labor Standards Act – a federal law that was introduced in the year 1938. Besides overtime, this law regulates child labor, minimum wage, recordkeeping, comp time, and equal pay.
According to the Fair Labor Standards Act, each employer must pay all his employees their minimum wages for all the hours they have worked. Besides the minimum wage, the employees must receive overtime pay, which is at the rate of 1.5 times the regular rate of the employees if they worked for more than 40 hours in a week.
Generally, you can define overtime pay as payment for any job which is performed outside the regular workweek of 40 hours. This payment should be one and a half times your normal hourly rate.
Note that it is only employees who are entitled to overtime pay and not independent contractors. This is because independent contractors work at their own pace and schedule, and are not subject to the directions of the hiring party.
Some fraudulent employers may categorize you as an independent contractor, yet you are an employee. These employers may do this to save money for them to run their organizations with minimal costs. If you are in such a situation, you will be responsible for your tax and health insurance costs. Additionally, you won't be paid overtime for any work done beyond the working hours.
If you think that your employer is misclassified you for selfish gains, you should reach out to a workers’ compensation attorney. This attorney will help you know whether you are an employee or an independent contractor. If they find out that you are an employee, they will sue your employer for your overtime dues.
Who is an Independent Contractor?
There is no fixed definition of an independent contractor under federal law. However, there are various factors that the court will consider before it classifies you as an independent contractor. Some of these factors include:
- Whether your relationship is you permanent
- If you are integrated into the employer's organization
- Whether the employer supplies equipment and facilities to you, and
- How much the employer controls your activities
California Courts mainly use two tests to determine whether you are an independent contractor or an employee. These two tests are the economic reality test and the control test. Here is a detailed explanation of both of them.
The Control Test
The control test or the Common Law Agency Test or the Master-Servant Test is utilized by the Internal Revenue Service (IRS) to distinguish independent contractors from employees.
This test asserts that if the employer exercises control over the person hired in any form or manner whatsoever, the hired individual is an employee – and not an independent contractor. Some of the determining factors in the control test include:
- The amount of control the employer exercises over the routine duties of the worker
- If the occupation involves some special skills that an employer lacks or is incapable of acquiring
- How the hired individual is paid, whether it is per milestones, a monthly salary, or on an hourly basis?
- If the employer supplies to the worker equipment necessary for him to fulfill his duties
- The period the hired individual has offered his services to the employer
- Whether there is an agreement that an employer-employee relationship has been established
- If the type of services being provided by the worker forms part of the regular business of the employer
- Whether the worker has been contracted to perform some similar services for other employers
The Economic Reality Test
The economic reality test has an extensive scope. The U.S. Department of Labor frequently applies it. This test looks at the economic realities of the labor market as a whole.
Using the economic reality test, The Labor Department will assess various factors before it categorizes you as either an employee or an independent contractor. Some of these factors include:
- If the worker has invested in the equipment and facilities of the employer’s organization
- The level of dependence the worker has over the employer for the availability of future work
- How much control the employer’s company exercises over the hired individual
- How essential the services of the hired individual are to the success of the business
- The potential of the worker for loss or profit
- Whether the relationship between the two parties is permanent
- How much the worker's planning, independent initiative, and judgment is necessary for his success
What is the Difference Between an Independent Contractor and an Employee?
Both the control test and the economic reality test have some exceptions and nuances. Due to this, it can be quite challenging to distinguish between an employee and an independent contractor.
Moreover, these tests are usually subject to adjustments and tweaks by various government agencies in the state of California. Nevertheless, you should completely understand how workers are classified. This way, no employer will violate your legal rights to overtime by misclassifying you. There are various fundamental differences between an employee and an independent contractor. These differences will help you know where you stand. Here are some of them.
- Business Ownership
Most independent contractors run their businesses. These businesses may be in the form of a sole proprietorship, or they may be companies. Usually, these businesses are built around the services they provide. Independent contractors can work for multiple clients.
It is rare to find an independent contractor who is tied down to one client. You may be categorized as an employee if you work for just one single organization or person, and you also depend on him to provide future work to you.
Independent contractors can delegate their duties to other people, while employees lack this mandate. Some independent contractors may have their employees, partner consultants, and sub-contractors. These contractors are responsible for all the tax obligations and reporting requirements of their workers.
If the person who has hired you permits you to delegate your duties to another professional, then you may be classified as an independent contractor. Generally, employees are obligated to carry out their duties in person, and it is unlawful and unethical for them to delegate.
- Industry Expertise
Most employees are usually given extra training by their employer’s organization to enhance their skills. On the other hand, independent contractors have specialized expertise in a particular task. Employers are not responsible for the independent training of contractors.
Employees benefit a lot of things from their employers. For instance, they may be provided with retirement plans, health insurance, or stock options.
Independent contractors are not entitled to these benefits, and they should cater to their insurance and payment schemes. Furthermore, independent contractors are not protected by the Worker's Compensation Act.
- Open Marketing
Independent contractors who have been hired long term by their clients will market their services to other potential clients. This is because they have the ambition to grow their business. They can also take on additional work from other people.
Unlike employees, independent contractors usually file their taxes. Employers are responsible for their employees’ tax obligations. If you are an employer and you withhold your employees’ taxes, you will have violated the law.
- Time Constraints
Traditional employees usually have a wide array of tasks and duties to carry out in their workplaces. On the other hand, independent contractors are only obligated to perform the tasks outlined in their service contracts.
An ideal service contract should outline the expectations of both parties, have precise details on the task to be performed, the time frame, and the terms of payment. Any party which breaches this contract will have to compensate the other party.
Typically, employees receive instructional oversight from their managers. A client cannot control how an independent contractor performs his tasks.
Independent contractors may not carry out their duties in their clients' workplaces. They even provide for themselves equipment and facilities to complete their projects.
Employees are usually paid a salary, while independent contractors submit invoices and await payment. Most of the time, the wages of employees are fixed; and they only vary when they are given overtime.
The payment of independent contractors varies. Some of them utilize standard billing rates, and they may charge their clients based on the quality of work they deliver.
Clients cannot determine the work hours of the independent contractors which they have hired. When independent contractors work and the amount of hours they keep is entirely up to them. On the other hand, employees must work for a particular set of hours as directed by their employers.
Hiring Arrangements and Independent Contractor Agreements
Some hiring arrangements may involve independent contractor agreements. Here, the person being hired agrees that they are an independent contractor, and they won’t be entitled to typical employee benefits such as insurance and overtime.
Generally, California law courts will not categorize you as an independent contractor simply because you agreed to put your signature on an independent contractor agreement. Moreover, these agreements will not affect the nature of your hiring relationship.
You can still be an employee, even if you signed the independent contractor agreement. The only factor which will determine the nature of the relationship with the person who hired you is whether you had an agreement that it was an employer-employee relationship.
Furthermore, you will be entitled to overtime pay even if you agreed to work for extra hours but not be paid for it. All agreements which limit or deny you your right to receive overtime pay are legally unenforceable.
Exempt Employees and Overtime Payment
Some employees are exempted from receiving overtime pay because of the nature of their work. These employees are commonly referred to as ‘exempt employees.’
The Fair Labor Standards Act highlights individuals employed as bona fide executive, outside sales employees, computer employees, professional, or administrative employees are exempt from overtime pay and minimum wage. For you to be considered as an exempt employee, you must be paid a salary that exceeds $455 a week or $23,660 annually. Also, you must be in an administrative position.
Some employers may lie to you that you are exempt to avoid paying you overtime. Make sure you talk to a workers’ compensation attorney to be sure of your employment status.
Comp Time vs. Overtime
Compensatory time, also termed as comp time is paid time off, which is given to a non-exempt employee instead of overtime pay. Some employers may prefer paying their employees comp time instead of overtime to cut operation costs.
According to the Fair Labor Standards Act, comp time must be paid at the same rate as overtime. If your employer fails to compensate you with this rate, they violate the law, and you may sue them for damages.
It is illegal for private-sector employers to replace overtime with comp time. All private sector non-exempt employees must be paid overtime for all the extra hours worked instead of comp time.
Your employers should not give you an option to choose between overtime and comp time. If they do this, they will have violated the law.
According to the U.S. Department of Labor, employees of local and state agencies or the federal government can receive compensatory time. The compensation is 1.5 times their regular pay and a substitute for overtime payment. Law enforcement officials, emergency response personnel, and firefighters may accrue up to 480 hours of comp time. Other local and state government employees have a limit of 240 hours’ comp time.
However, the government agency must meet several conditions before it gives its employees comp time instead of overtime. Some conditions include agreeing with the worker's union representatives and requesting employees for their consent in the agreement. Additionally, the comp time is provided for in the same pay period when the extra hours were worked.
There are various penalties which employers in the private sector may face if they substitute overtime with comp time. Some examples of these punishments include fines, which may be up to $10,000, paying liquidated damages, back wages, legal fees, and jail terms.
If you have been paid comp time instead of overtime, but you prefer the latter option, you should get in touch with an experienced workers' compensation attorney. This attorney will advise you on the best steps to take.
What to Do if Your Employer Misclassifies You as an Independent Contractor to Avoid Overtime Costs
There are several remedies that you can seek if your employer misclassifies you as an independent contractor instead of an employee in a bid to avoid overtime costs. All employees in California have a right to be paid overtime. Furthermore, your employer should not pressurize you to ‘work off the clock.’
You can bring an overtime lawsuit against your employer to collect overtime payment, that was wrongfully denied to you. If you win your lawsuit, you will also be entitled to interest on the unpaid overtime and the costs of the suit.
Don't worry if you have no proof or written records of the hours you worked. As per California's Labor Laws, the employer must maintain all the documents concerning your pay and work hours. In case your employer didn't keep these records, your testimony under oath will be deemed to be sufficient by the court to prove your claim. Additionally, employees wrongly misclassified as independent contractors, thus denying them rest and meal breaks should receive hourly pay at their standard rate. The pay is compensation for each break or rest period they were denied.
Damages for Overtime Lawsuits
As asserted earlier, you will receive monetary compensation if you win an overtime lawsuit against your employer. This financial compensation is fondly referred to as ‘damages' by California courts.
The value of the damages that the court will grant you depends on the wage and hour violations of your employer. Some of the most common wage and hour violations include minimum wage violations, willful misclassification as independent contractors, overtime violations, and rest and meal break violations.
Willful misclassification means that your employer voluntarily and knowingly misclassified you as an independent contractor to avoid paying certain employee costs. In the state of California, willful misclassification as an independent contractor has a civil penalty of between $5000 - $25,000 for each violation. If the court charges your employer this penalty, he will not be permitted to make deductions or charge any fees from the damages he owes you.
You can also claim for liquidated damages. The amount of these damages will be equal to the value of your unpaid damages, together with interest. For instance, let us say that the value of all your unpaid overtime wages is $15,000. If you are awarded liquidated damages, you will receive $30,000, which is the original $15000 multiplied twice. In most cases, the judge will grant you liquidated damages if he believes that the employer’s actions were not in good faith.
Your attorney can help you out if you are not sure how much overtime your employer owes you. All you need to do is to provide him with all the necessary details.
Overtime lawsuits are usually settled quickly, and they may only take a couple of months. However, if your employer defends himself vigorously, your suit may stretch to a period of one full year.
The Statute of Limitations and Overtime Lawsuits
If you intend to sue for overtime payment, you must first check whether you have run out of time. The Statute of Limitations has enlisted some specific timeframes which you must observe for you to file civil lawsuits. If the time limit lapses, you won't be permitted to institute your claim.
In California, the maximum timeframe in which you can file a wage and hour lawsuit to receive overtime payment is three years. When these three years lapse, you won’t have any legal recourse for you to receive your overtime.
It is recommended that you file an overtime lawsuit as soon as possible. This suit makes it easier for you to prove your claim because you will have access to all your work records. Further, you will get a sufficient number of witnesses who can testify for you.
Can Your Employer Fire You for Instituting an Overtime Lawsuit Against Him?
No, your employer can’t dismiss you if you institute an overtime lawsuit against him, or report him to the authorities for his unlawful ways. Your employer can't retaliate against you in any way if you attempt to exercise your legal rights against him.
In case your employer takes action against you just because you sued him for overtime payment, he will have broken the law. In such a scenario, he will have wrongfully terminated your employment, and the court will hold him liable.
Find a Los Angeles Workers Compensation Attorney Near Me
Perhaps you have some unanswered questions about the difference between an independent contractor and an employee. Or maybe you think that you have been misclassified as an independent contractor so that your employer can deny you your overtime payment. If any of these situations apply to you, do not hesitate to call us at 310-956-4277.
Workers Compensation Attorney Law Firm is dedicated to helping you have a better working experience in Los Angeles. We will be delighted to offer you professional legal help.