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The problem with employee misclassification

On Behalf of | Jul 18, 2023 | Employment Law

Over 30% of employees in California are misclassified as exempt, costing them lost wages and benefits. According to labor laws, employers must pay nonexempt workers overtime pay and provide them with benefits. However, some companies may intentionally misclassify employees to lower their expenses.

Exempt vs. nonexempt employees

California law draws a distinction between exempt and nonexempt employees. The primary differences lie in their job duties, responsibilities, payment structure and associated rights.

Typically, employees who hold white collar job titles such as executives, admins, professionals, as well as freelance workers and independent contractors are exempt. As such, they are “exempt” from receiving overtime pay, break requirements or other employee benefits.

Conversely, blue-collar work titles, those that involve physical labor or are lower in the company hierarchy, typically fall under nonexempt. Examples of nonexempt jobs include construction workers, restaurant staff, office clerks, general laborers and retail associates.

California labor laws entitle nonexempt workers to the following:

  1. Overtime pay at a rate of one-and-one-half times their regular rate
  2. Meal and rest breaks
  3. Minimum hourly wage
  4. Vacation and sick leaves
  5. Wage and hour law protection

Additionally, as employees, they must be eligible for certain workplace protections, employee benefits and workers’ compensation. Employers must also shoulder any payroll tax obligations and social insurance costs. Unfortunately, employee misclassification deprives them of these benefits.

It’s important to keep in mind, however, that the above distinctions are not absolute. Employees who suspect misclassification may consult an employment law attorney to determine if they have a case and what their next steps should be. Suing an employer for employee misclassification may allow workers to recover the full amount of their unpaid wages, along with the same amount in liquidated damages.