A demand letter says your independent contractors are really employees. Or a salaried manager claims years of unpaid overtime. Or the EDD wants your 1099 records. Each one is a misclassification claim, and each one can reach back years.
Karin Backstrom defends San Diego businesses against misclassification claims and helps them fix classification problems before they spread. Backstrom Labor Law represents employers only.
Request a Consultation
Tell Karin about your classification issue.
Send the basics and we'll reach out to schedule your consultation.
Confidential. Reviewed personally by Karin Backstrom.
Misclassification means a worker was placed in the wrong legal category. In California, that mistake usually happens in one of two ways.
The business pays a worker on a 1099 as an independent contractor, but California law treats the worker as an employee. The business then owes wages, overtime, breaks, reimbursements, and payroll taxes it never paid.
The business pays a salaried employee as exempt from overtime, but the job fails the duties test or the salary test. The employee can then claim unpaid overtime and missed break premiums for every week worked.
Both problems are wage claims at heart, so they sit within Backstrom Labor Law’s wage and hour litigation work for employers. They also tend to affect groups of workers, which is why Karin pairs classification defense with broader San Diego wage and hour defense when a claim could reach your whole workforce.
California presumes every worker is an employee. Under the ABC test in Labor Code 2775, which took effect through AB 5 on January 1, 2020, your business must prove all three of these points.
Part B causes the most trouble. A Chula Vista HVAC company that pays its installers on a 1099 will struggle, because installation is the company’s core business.
Some occupations and arrangements fall under exemptions. For those, California applies an older multi-factor test, often called the Borello test, which focuses on control. A business-to-business exemption in Labor Code 2776 also exists, but it requires every one of its conditions, including a written contract, a separate business location, and other clients. This overview of independent contractor vs. employee rules in California explains each exemption in more detail.
Paying a salary does not make an employee exempt. A job must pass two tests.
The City of San Diego sets a higher local minimum wage of $17.75 an hour in 2026, but the exempt salary floor follows the state rate. Job titles do not decide exempt status either. Assistant managers, office managers, inside sales staff, and IT support roles draw frequent claims.
When these claims arrive as unpaid overtime suits, an overtime defense attorney in San Diego can test whether the job truly failed the duties test. For a side-by-side checklist, see this exempt vs. non-exempt classification guide.
Karin reviews your contractor and exempt roles under California's tests and tells you where the real risk sits, before someone else raises it.
Misclassification exposure stacks. One worker’s claim usually includes several of these.
When the same classification covers many workers, a single employee can also bring a PAGA claim for civil penalties counted per employee and per pay period. California’s 2024 PAGA reforms reduce those penalties for employers that took reasonable steps to comply, so early action matters. A PAGA defense attorney in San Diego can show you what those steps look like.
The cost of a misclassification claim grows with every pay period it goes unaddressed.
Most employers learn about a classification problem through one of these doors.
An EDD audit has its own process and appeal rights, and this guide on what to expect in an EDD audit walks through each stage.
Fixing a classification problem is often the right move. Doing it carelessly can create evidence for the claims you are trying to avoid.
Have an attorney review the roles first so the analysis stays protected. California law can make a paid adviser who knowingly recommends misclassification share the liability, and it excludes attorneys giving legal advice.
Know the realistic number before you decide how to handle past periods.
How you explain the change to workers matters, because those emails and meetings can surface later.
California limits releases of wages that are due. A release signed without full payment may not hold up.
Move reclassified workers onto timekeeping, break tracking, wage statements, and reimbursement policies from day one.
The IRS offers a voluntary program for federal employment taxes. It does not resolve California wage or EDD exposure.
Karin builds a privileged reclassification plan that addresses past exposure, worker communication, and payroll changes in the right order.
Karin handles your matter herself, whether it starts as a letter, an audit, or a lawsuit.
She reads the demand, notice, or audit request and confirms every deadline.
She tests each role under the ABC test, the Borello factors, the business-to-business rules, and the exempt duties and salary tests.
She calculates realistic back pay, penalties, and tax exposure so you can make informed choices.
She represents you in EDD audits and Labor Commissioner proceedings.
She defends individual suits, class actions, and PAGA claims, including any arbitration agreement issues.
She sets up classification practices that hold up the next time someone asks.
Owners want a lawyer who understands how their business really runs, not just how the statute reads.
The attorney who defends your claim also fixes the practice behind it. You do not pay a second firm to learn your business.
Karin trained at Littler Mendelson and Sheppard Mullin and has litigated more than 500 employment cases. Read Karin's full attorney profile.
The firm never represents workers in misclassification cases. Its advice is aligned with your business from the start.
Karin provides misclassification defense for San Diego businesses from her Old Town office and represents employers throughout California.
No. A contract and a 1099 help show intent, but California looks at how the relationship works in practice. The Labor Commissioner's independent contractor FAQ explains how the state applies the test.
Willful misclassification carries civil penalties of $5,000 to $15,000 per violation under Labor Code 226.8, or $10,000 to $25,000 for a pattern or practice. Employers can also owe back wages, overtime, break premiums, expense reimbursement, wage statement penalties, payroll taxes, and PAGA penalties.
Not by itself. Many employers reclassify to reduce future risk. How you communicate the change and handle past pay periods matters, so plan it with counsel first.
In 2026, exempt employees must earn at least $70,304 a year, which is twice the state minimum wage for full-time work. The floor rises to $72,384 on January 1, 2027. The employee must also pass the duties test.
Sometimes. The exemption in Labor Code 2776 applies only when every condition is met, including a written contract and an independent business that serves other clients. Missing one condition puts the ABC test back in play.
Most wage claims reach back three years, and four years under the Unfair Competition Law. The EDD generally assesses payroll taxes for three years, and longer when required returns were never filed.
A common trigger is a former 1099 worker applying for unemployment benefits. The EDD then asks whether that worker should have been on payroll, and the review can expand to similar workers.
Karin will review the claim, test your classifications, and give you an honest estimate of exposure and a plan to address it.
