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Misclassification and the denial of a workers’ comp claim

If you are an independent contractor, you are not eligible to receive workers’ compensation benefits in the state of California.

However, some employers misclassify employees as independent contractors. Has this happened to you?

A misclassification crackdown

The U.S. Department of Labor works with the IRS and state workforce agencies to uncover employee misclassification practices. The IRS, for example, has a Questionable Employment Tax Program through which they identify schemes that involve misclassifying employees as independent contractors so employers can avoid paying the appropriate taxes. The misclassified employees are not eligible to receive such benefits as overtime pay or pay for meals or breaks. If injured on the job, they do not qualify for workers’ compensation benefits.

Targeted industries

Incidents of misclassification cost California billions of dollars in lost payroll tax revenue. In 2011, the state legislature passed Senate Bill 459, which prohibits companies from deliberately misclassifying workers as independent contractors. Companies in every industry must have well-documented relationships with their independent contractors or be at risk for noncompliance. Industries the combined federal and state task force finds most at fault include construction, internet services, trucking, hotel/motel, catering, landscaping and oil and gas.

Injured on the job and more

A workers’ compensation insurance carrier will deny any claim for benefits that comes from an independent contractor. However, if the company you work for classifies you correctly as an employee and you suffer an on-the-job injury or illness, the company must honor your right to submit a claim. You may need ongoing care, and you can expect financial compensation to cover your current and future medical expenses plus lost wages. On its own, the Labor Department has uncovered hundreds of incidents of illegal classification practices and prosecuted the companies responsible.

If you ever find yourself misclassified as an independent contractor, explore your legal options. In addition to your eligibility for workers’ compensation, you may be able to file a wage claim with the Labor Commissioner’s Office.