Carlos Castellon worked as a driver for Penn-Ridge Transportation, Inc., a company that delivers the goods of major retailers (such as Best Buy) to the homes of consumers. The delivery drivers and their helpers delivered and installed appliances at the consumers' homes. The workers were categorized as independent contractors (ICs).
Castellon sued the company in a class action alleging that he and his fellow drivers were misclassified as ICs because the companies controlled the work schedules, delivery procedures, and how they can clock in and out of work. The companies also had the ability to discipline and fire delivery workers and their assistants at any time.
The workers' lawsuit alleged that the companies failed to pay minimum wage, failed to pay overtime, failed to reimburse business expenses of employees, failed to provide rest and meal periods, failed to furnish accurate wage statements, and failed to pay all wages due at termination of employment.
The status of a true independent contractor is determined by law and not by contracts. Even if workers signed a contract that says they are independent contractors, this does not make them ICs. California created the ABC standard for properly classifying a worker as an independent contractor. If you are a worker being asked to sign an IC agreement, ask yourself the following questions:
(A) Am I free from the control and direction of the company in how I do the work?
(B) Am I doing work that is outside the usual course of the company's business?
(C) Do I have my own business or established trade or occupation that I normally do which is the same type of work performed for the company?
If your answer to any one of the questions above is a No, then you are more likely an employee than an IC. Specifically, under test B, a worker is presumed to be an employee but may be classified as an independent contractor only if “the worker performs work that is outside the usual course of the hiring entity's business.” The ABC test presumes a worker hired by a company is an employee and it is the company's burden to prove that the worker is an independent contractor.
If the company fails to show that the worker satisfies each of the three criteria, the worker must be classified as an employee, not an independent contractor.
Being misclassified as an IC has serious consequences for a worker. ICs are not considered employees. Because they are not considered employees, ICs are not covered by the protections of California employment law, namely:
- No right to minimum wage, thus no right to be paid for each and every hour worked
- 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 no right to collect these benefits if fired or laid off)
- No state workers' compensation protection if injured at work
- Not entitled to additional benefits such as sick pay, retirement, and profit-sharing plans
- No protection from wrongful termination of employment
- Limited protection from discrimination
Workers who are found to have been misclassified as ICs are entitled to back wages, interest, liquidated damages, and penalties, among others. Rather than proceed to trial, the parties agreed to enter into a settlement of $3.25 million.