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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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Experience:  Significant experience in all areas of employment law.
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Was paid as a contractor for over a year, acted in an employee

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Was paid as a contractor for over a year, acted in an employee capacity in totality including equity program, operations and referred to by employer as an employee. Owners and myself are residents in California (Los Angeles) but acts in Austin for the tax savings. My salary/contract rate was modified in a take it or leave it scenario with 10 days notice given. Written conversations regarding salary, bonus and equity ignored. My employer has potential exposure given the residency veil (Austin) despite living in California, as well as other implied contract/employment items ignored. Curious if i have a case.
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 1 year ago.
Hello and thank you for entrusting me to answer your question.

Were you denied overtime or the equivalent of minimum wage for all hours worked? Were you deneid some other benefit to which only employees are entitled (i.e. workers compensation, SDI, etc.)? What sort of damage are you alleging as a result of this misclassification?

I very much look forward to helping you on this matter.
Customer: replied 1 year ago.

I was working 100+ hours a week. On April 17th i received an email sent company wide telling me my salary / contract rate was going to be halved effective May 1st. They did not respond to any of my emails regarding this, or my multiple attempts to understand, it was an email that just said this iw what we are paying you going forward because we think thats fair. It was not a salary i could work on so on May 1st when i received half salary i worked for a week (vs two weeks) and stopped working there. There are some big areas of exposure i think for them. (1) I was treated and handled like an employee, referred to by my employer as an employee but paid contract (2) I was constantly harassed in the workplace by my employers father in law who was also an employee including multiple emails i have possession of which he sent telling other employees to ignore me or that i was going to be fired or that they where not to follow my directives. (3) they have Drivers License.Residence in Austin but in reality they live in Los Angeles as a tax break (4) I have equity and bonus monies due to me

Expert:  Patrick, Esq. replied 1 year ago.
Thank you very much for your reply.

This biggest issue would appear to be your misclassification as an independent contractor. You already appear to be familiar with the legal distinction between employee and contractor and the legal requirements for each designation. For additional information, about the distinction, see here: http://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked- Tax-Questions-&-Answers/Small-Business,-Self-Employed,-Other-Business/Form-1099-MISC-&-Independent-Contractors/Form-1099-MISC-&-Independent-Contractors-1

Assuming you were in fact misclassified, which would appear to be the case, you would be entitled to minimum wage for all hours you actually worked and overtime for all hours worked in excess of 8 per day or 40 per week. If you worked 7 consecutive days within a given workweek, you'd also be entitled to overtime for all hours worked on the seventh day.

While your misclassification is significant, it would not affect your employer's right to cut your pay, which your employer can do regardless of whether you are a contractor or employee, so that is not illegal. However, since the cut in pay was substantial and forced you to quit, you would likely be eligible for unemployment benefits (note that contractors are not, but since you were in actuality an employee, you can claim entitlement).

As an employee, you would also be due ALL outstanding wages within the later of either (a) 72 hours after you gave notice of your intent to quit, or (b) the date on which you actually quit. If your employer fails to pay the equity and bonus monies due, a late penalty would accrue in the amount of your daily rate of pay for each day that the wages still went unpaid up to 30 days. This penalty, which is provided through Labor Code 203, applies only to the delinquent payment of wages to employees.

While the residency issue may be significant to the IRS and state of California, it would have no bearing on you and would not entitle you to any form of additional damages.

Similarly, unless you can prove that the harassment you experienced was related to your race, religion, gender, sexuality, or some other protected trait, it would not give rise to a claim for damages. Contrary to commonly held belief, harassment and rude treatment in the workplace is not generally actionable.

To summarize, assuming you are an employee you would be entitled to overtime and compensation for all hours you actually worked. You would also likely be eligible to collect unemployment, since you quit due to a substantial reduction in your wages. You would also be entitled to demand immediate payment of the bonus monies owed to you and could collect penalties for non-timely payment.

These wages claims can be brought through the Department of Labor Standards Enforcement. To file a wage claim with the DLSE, visit this link: http://www.dir.ca.gov/dlse/howtofilewageclaim.htm

For information on how to file a claim for unemployment benefits with the EDD, visit this link: http://www.edd.ca.gov/unemployment/filing_a_claim.htm

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.
Customer: replied 1 year ago.

Thank you, XXXXX XXXXX summary do you think i have any legal options to get the company to legally bind my equity position or cash it out and/or go after them for monies, or should i just file it with the DLSE? Thanks, XXXXX XXXXX positive review.

Expert:  Patrick, Esq. replied 1 year ago.
Can you explain more about this equity position in the company you are talking about? What has been promised to you exactly?

Thank you for the positive feedback.
Customer: replied 1 year ago.

When i joined i was offered my salary, bonus, equity - i only ever got my salary i never got any form of overtime or similar. The owner of the company is a multi millionaire that was just very relaxed about everything and little follow through but i do have emails confirming these would be solved. I felt that i had some legal opportunity under the implied contract banner as when i joined the company i took a pay cut understanding the expectancy of what the role would/could provide me both in terms of security and job protection, monies in payment and future equity based on the value of the company. I am less concerned about the overtime dollars although i am sure they are very high as i spent 4.5 days a week on the road and might assume overnight stays are perhaps paid but more concern whether this implied in fact contract had an expectancy that my earnings and opportunities would continue to grow and therefore i was terminated without cause or contrary to this.

Expert:  Patrick, Esq. replied 1 year ago.
Thank you for your additional explanation.

Unfortunately, an implied contract theory would not apply. Implied contracts are recognized only under limited circumstances and the theory is generally applied only to establish that termination could not occur but for adequate "cause."

Since the terms of employment can ordinarily be changed at any time, one cannot argue that an implied contract obligates an employer to provide additional compensation, promotion, or something else in the future because future employment is itself never guaranteed.

If you have a written contract providing you with an equity stake in the company, your rights would depend on the specific terms of the agreement. At the very least, I see no possible means through which your resignation would automatically divest you of your interest. This could not be pursued through the DLSE, however, since it is not a "wage" but rather a contractual dispute about ownership.

I hope that this addresses your question. If not please, feel free to ask for further clarification.
Patrick, Esq., Lawyer
Satisfied Customers: 7017
Experience: Significant experience in all areas of employment law.
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