California’s statute of limitations for filing an employee misclassification lawsuit against your employer is three years from your last day of work. It can be extended to 4 years if your employment contract was breached. However, do not wait until the statute of limitations is about to expire to start your case: It takes time to prepare a good one.
The California statute of limitations for misclassifying employees
Two statutes of limitations may apply to misclassification lawsuits. They depend on whether the employment contract was breached by your employer.
The best way to know whether your employment contract was breached is to get the legal advice of an experienced employment attorney. This is very important, as misclassified workers who do not comply with the time limits set out by the applicable statute of limitations can see their case dismissed.
Breach of employment contract
If your employer breaches your employment contract, the statute of limitations is 4 years.[1] This only applies to written employment contracts, though our employment law attorneys rarely encounter oral agreements.
These four years begin on the last day that you worked.
No breach of employment contract
If there was no breach of your employment contract, then the statute of limitations is 3 years.[2]
These three years start on the date of the most recent violation of California wage and hour law. This is often the last day that you worked.
How misclassification works
Worker misclassification happens when the company that you work for claims that you are one type of worker, but then treats you like you are another. The 2 most common ways that companies misclassify their workers is by misclassifying:
- employees as independent contractors, and
- non-exempt employees as exempt.
Companies do this to save money and get more work from their workers. They often put the wrong employee status in your employment contract to make you think that you are the wrong class of worker. However, the law looks at the realities of the employment relationship, not what the employment contract says. According to the California Supreme Court:
“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”[3]
The practice is especially common in the gig economy. It was so common that many states, including the state of California,[4] altered their employment laws to stop it. The practice is so fundamental to certain industries in the California gig economy, like ridesharing, food delivery, and trucking, that companies responded to the new laws by funding a ballot initiative that overturned the newly created workplace protections against misclassification.[5]
For many employers, the misclassification of employees is a policy. Because the wage and hour violations are so common, aggrieved workers can consolidate their wage claims into a class action.
Independent contractor
Independent contractor misclassification happens when your company hires and pays you as an independent contractor, but treats you like their employee.
When you are misclassified as an independent contractor, you lose the following workplace protections and entitlements:
- the right to get paid the applicable minimum wage,
- overtime pay,
- meal and rest breaks,
- workers’ compensation coverage,
- other workplace benefits, like health insurance and unemployment insurance,
- vacation time,
- sick leave,
- reimbursements for business expenses, and
- protections from liability for lawsuits over injuries caused by your negligence on the job.
Additionally, your employer saves money by not having to pay payroll taxes for Social Security and Medicare. Instead, you have to pay your employer’s share of them to the IRS.
By treating you as an employee, though, you lose the ability to:
- control how you work, such as by choosing your own working hours, and
- work for other employers.
To determine whether you are actually an employee or an independent contractor, California employment law uses the “ABC test.”[6] Federal law promulgated by the U.S. Department of Labor (DOL), however, uses the economic realities test.[7]
Exempt employees
A less common form of worker misclassification is to classify non-exempt workers as exempt. This happens when your employer says that you are exempt from California wage and hour protections, when you really are not.
Exempt employees are not entitled to:
- overtime pay, or
- meal and rest breaks.
However, they must be paid at least twice the applicable minimum wage and fall into one of the 5 following categories:
- executive employees,
- administrative employees,
- licensed professionals,
- computer employees, or
- outside sales employees.[8]
The employment lawyers at our law firm have found that lots of employers misclassify non-exempt employees as exempt in order to get more work hours out of them without having to pay overtime.
Penalties for misclassification
By filing a misclassification lawsuit, you can recover:
- back pay for unpaid wages, including for:
- unpaid overtime,
- missed rest or meal breaks, and
- workplace benefits that you were deprived of;
- interest on those unpaid wages, and
- attorneys’ fees.
If you were misclassified as an exempt employee, the Fair Labor Standards Act (FLSA), the main federal employment law, entitles you to liquidated damages, which doubles what you can recover.[9]
If your employer deliberately misclassified you, California labor law imposes a civil penalty of between $5,000 and $25,000 on your employer for each instance of willful misclassification.[10]
Why it is important to file quickly
Just because you have 3 or 4 years to file a misclassification case does not mean that you should wait that long. Preparing a good lawsuit takes time. Worse, it gets more difficult the longer you wait. Evidence will become more difficult to find. Relevant workers and supervisors may have left their job and moved. Important documents may have been thrown away or lost.
If you take legal action to invoke your employee rights under California law, but then your employer fires you, you may have a wrongful termination claim.
Legal Citations:
[1] California Code of Civil Procedure 337 CCP.
[2] California Code of Civil Procedure 338 CCP.
[3] S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341, 342 (1989).
[5] California Proposition 22 (2020).
[6] California Labor Code 2775 LAB and Espejo v. The Copley Press, Inc., 13 Cal.App.5th 329 (2017).
[7] 29 CFR 795.100. See also 90 FR 1638 (Jan. 10, 2024).
[8] California Labor Code 515 LAB.
[9] 29 USC 216(b).
[10] California Labor Code 226.8 LAB.
