Misclassified As A Contractor In California? Your Step-By-Step Action Plan

Think Your Employer Got It Wrong? How To Fight Back Against Misclassification in California

If you’re an independent contractor or freelancer in California and you’re starting to wonder whether you’ve actually been working more like an employee — you’re not alone.

Every year, thousands of workers across creative, tech, marketing, logistics, construction, and other industries are misclassified by companies looking to avoid taxes, benefits, and labor laws.

Misclassification doesn’t just impact your taxes — it affects your ability to collect unemployment, access benefits, and protect your rights.

The good news?

California law is on your side.

And this guide will walk you through exactly what to do, step-by-step.

Follow my potential independent contractor misclassification case study where I document my ongoing dispute with a California cannabis accountant doing business as Verdant Strategies powering 420 CPA.

What Is Worker Misclassification?

If a company treats you like an employee but calls you a “contractor,” that’s misclassification — and it’s illegal.

Under California’s ABC test (part of AB5 – Labor Code § 2775), you’re legally presumed to be an employee unless your client can prove:

A. You’re free from their control and direction while working
B. Your work is not part of their usual business
C. You run your own independent business doing the same kind of work

If you answered “no” to any of those, it’s very possible you were misclassified.

Common Signs You Were Misclassified

You’re told when, where, and how to do your work
You’re required to follow internal processes or get approvals
You work exclusively or primarily for one company
You’re using the company’s tools, systems, or email
The work you’re doing is part of the company’s core business
You receive training from the company
You’re expected to work set hours or be available during specific times
You report to a supervisor or manager
You’re prevented from working for other clients
You’re required to attend meetings or check-ins
Your work is ongoing, not project-based or temporary
You don’t have a business license or business insurance
You’re listed on the company’s website, org chart, or Slack workspace like an employee
You use company-provided uniforms, business cards, or branded materials

If this sounds familiar, keep reading.

California Penalties For Misclassifying Employees As Independent Contractors

Under California Labor Code § 226.8, it is unlawful for an employer to willfully misclassify a worker as an independent contractor.

If the Labor Commissioner or a court finds that a company has done so, severe penalties apply — and they’re designed to both punish violators and deter future abuse.

Here’s a concise summary table of penalties for willful misclassification of workers in California.

Penalty Type	Details
Civil Penalties (Standard)	$5,000–$15,000 per violation
Civil Penalties (Pattern or Practice)	$10,000–$25,000 per violation
Public Notice Requirement	Must post notice on website or workplace for 1 year, signed by an officer, stating the company broke the law
Contractor License Disciplinary Action	If licensed under CSLB, disciplinary action is required (e.g., suspension, revocation)
Successor Business Liability	Penalties follow to new businesses with shared officers/principals and similar operations
Additional Worker Remedies	Back wages, overtime, expense reimbursements, rest/meal break penalties, UI/disability/worker’s comp benefits
Public Enforcement	Labor Commissioner, EDD, Attorney General, and local prosecutors may investigate and enforce
Legal Definition	“Willful misclassification” = knowingly avoiding employee status under the law

Lear more about California Penalties For Misclassifying Employees As Independent Contractors

Step-By-Step Action Plan: What To Do If You Were Misclassified

Step 1: Confirm Your Classification Was Likely Wrong

Ask yourself:

Did the company control your schedule or how you performed your job?
Were you integrated into the company (e.g., attending team meetings, using company email)?
Were you prevented from working for other clients?
Did they treat you like an employee in practice but not on paper?

If yes, you have a potential case.

Step 2: Gather Your Evidence

You’ll want to collect as much documentation as possible:

Contract – to show the terms of the relationship
Screenshots or Emails – showing control, direction, scheduling, task management
Work Schedule or Deadlines – anything that shows you had to follow their timing
Invoices and Payments – to document pay structure and amounts
Work Samples or Deliverables – to prove what kind of work you were doing
Timeline of Events – especially around how you were onboarded, managed, and offboarded

Step 3: File A Complaint With The California Labor Commissioner (DLSE)

This is your first and most important step. The Labor Commissioner investigates misclassification and can help recover:

Unpaid wages or overtime
Business expense reimbursements
Missed meal/rest break penalties
Civil penalties and interest

How to File:

Download and fill out DLSE Form 1 – Wage Claim
Write a clear explanation of your job duties and why you believe you were misclassified
Attach your supporting evidence
Submit it to your nearest DLSE office

Step 4: File IRS Form SS-8

If you’re concerned about your federal tax status or want the IRS to investigate, you can file:

Form SS-8 (Determination of Worker Status)

While it won’t recover wages, it can trigger a federal audit of the company and adjust how your income is reported.

Step 5: File With Local Authorities (City or County)

If you’re in cities like Los Angeles, San Francisco, or San Diego, you may have additional protections:

In Los Angeles:

Report to the Office of Wage Standards (OWS)
👉 https://wagesla.lacity.gov/

This adds another layer of pressure and helps enforce local labor laws like minimum wage, paid sick leave, and worker protections.

Step 6: Talk To A California Employment Attorney

If your contract was broken, if you were terminated unfairly, or if you want to recover everything you’re owed, it’s worth speaking to a lawyer.

They can help you pursue:

Full back pay
Penalties for willful misclassification
Remaining contract payments (if you were wrongfully terminated)
Possibly invalidate arbitration clauses, which are often unenforceable in employee wage disputes

Sample Statement You Can Use

You’ll need to write a clear and honest explanation of what happened. Here’s a basic template:

“I was classified as an independent contractor by [Company Name] from [Date] to [Date], during which I performed work including [Brief Summary]. However, I was directed and managed like an employee. I had to follow their schedule, get approval for my work, and was not permitted to operate independently. Based on California’s ABC test, I believe I was misclassified and am seeking proper classification and recovery of unpaid wages, tax contributions, and applicable penalties.”

What Happens Next?

Once you’ve filed your claims:

The Labor Commissioner may schedule a settlement conference or hearing
The EDD may launch an audit of the company
You may be eligible to collect unemployment
Your filing creates a record that protects your future rights

Final Checklist: Your Misclassification Toolkit

Copy of your contract
Evidence of control/direction from client
Invoices, payments, or time logs
Work product or deliverables
DLSE Form 1
IRS Form SS-8 (optional)
Contact info for a labor attorney

Final Thoughts

Being misclassified as an independent contractor doesn’t just cheat you out of money — it denies you legal protections you’ve earned through your labor.

Thankfully, California has some of the strongest worker protection laws in the country — and now, you know exactly how to use them.

If this article helped you or you want a sample letter, pre-filled forms, or help organizing your complaint package, feel free to reach out or share this guide with others in your network.

You’re not just a freelancer — you have rights.

Don’t let anyone convince you otherwise.