How do I know if I was misclassified as a contractor in San Francisco?

California uses the ABC test under AB 5. You're presumed to be an employee unless the company proves: (A) you were free from their control, (B) your work was outside their core business, and (C) you operated an independently established business. Most contract workers at SF tech companies fail at least one prong, particularly prong B, because they're doing the company's core work.

Does Proposition 22 affect my classification if I work for an SF tech company?

Only if you're an app-based rideshare or delivery driver. Prop 22's contractor carve-out is narrow and applies only to companies like Uber, Lyft, and DoorDash for their drivers. If you're a software engineer, designer, marketer, or other professional classified as a contractor at an SF company, Prop 22 doesn't change your ABC test analysis.

What claims do I have if I was misclassified as a contractor?

Potentially significant ones. Misclassified employees can recover unpaid overtime, meal and rest break penalties, unreimbursed business expenses, waiting time penalties, and more. San Francisco workers may also have claims under the city's Paid Sick Leave Ordinance. These accumulated claims often reach five or six figures and give you real leverage in severance negotiations.

Contract Worker Severance in San Francisco: Misclassification and Your Rights

San Francisco is the birthplace of the gig economy. Uber, Lyft, DoorDash, Instacart. These companies built entire business models around classifying workers as independent contractors. But the gig economy is just the tip of the iceberg. Across the city, tech companies, creative agencies, consulting firms, and startups rely heavily on "contract" workers who may not actually be contractors under California law.

If your contract just ended and the company is telling you that severance doesn't apply because you were "just a contractor," don't take that at face value. You might be an employee who's been misclassified. And if you are, you're owed a lot more than severance.

The ABC Test: California's Standard

California uses the ABC test, codified by Assembly Bill 5 (AB 5), to determine whether a worker is an employee or an independent contractor. Under this test, you're presumed to be an employee. The company has to prove all three of these factors to classify you as a contractor:

A: You're free from the company's control and direction. Not just on paper, but in practice. If the company tells you when to work, how to do your job, requires you to attend meetings, or manages your daily tasks, this prong fails.

B: The work you perform is outside the company's usual course of business. This is the prong that catches most San Francisco tech companies. If you're a software engineer working for a software company, your work is the company's core business. It doesn't matter that they called you a contractor. A plumber who fixes the office pipes? That's outside the usual course of business. A developer building the product? That's the business itself.

C: You're independently established in that trade or occupation. Do you have your own business? Your own clients? Your own website and marketing? Or did you only work for this one company? If the company was your sole client and you didn't operate an independent business, this prong fails.

All three prongs must be satisfied. If even one fails, you're an employee under California law, regardless of what your contract says or what box the company checked on your 1099.

Why SF Is a Misclassification Hotspot

San Francisco's tech economy creates the perfect conditions for misclassification. Companies need to scale quickly, so they bring on "contractors" to avoid headcount commitments. Startups keep workers on 1099s to reduce payroll taxes and avoid benefits obligations. Consulting firms and staffing agencies place workers at SF tech companies in roles that look and function exactly like employment.

The numbers are large. A contractor at a San Francisco tech company might earn $80 to $200 per hour but receive zero benefits, no paid time off, no sick leave, and no severance. If that worker is actually an employee under the ABC test, the company has been avoiding employer-side payroll taxes, workers' compensation insurance, unemployment insurance contributions, and all the protections that come with employment status.

What Misclassification Means for Your Severance

If you were misclassified as a contractor, the severance conversation changes completely. Instead of having zero leverage ("contractors don't get severance"), you suddenly have significant claims:

Unpaid overtime. As an employee, you were entitled to overtime for hours over 8 in a day or 40 in a week (assuming you were non-exempt). Many contractors in San Francisco work 50 to 60 hour weeks without overtime pay. Those wages are owed, plus interest and penalties.

Meal and rest break violations. Employees get a 30-minute meal break after 5 hours and a 10-minute rest break every 4 hours. Each missed break carries a penalty of one hour of pay. If you worked through lunch every day for two years, that adds up fast.

Expense reimbursement. Under Labor Code Section 2802, employees must be reimbursed for necessary business expenses. If you used your own computer, paid for your own software licenses, or covered other work-related costs, those expenses should have been paid by the employer.

San Francisco-specific protections. San Francisco has its own Paid Sick Leave Ordinance and Health Care Security Ordinance that provide additional protections for employees. If you were misclassified, you missed out on these benefits too.

Waiting time penalties. Under Labor Code Section 203, if an employer doesn't pay all wages owed at termination, the employee can recover up to 30 days of additional pay as a penalty. If you were an employee and the company failed to pay you everything you were owed, these penalties kick in.

Proposition 22 and the Gig Economy Carve-Out

In 2020, California voters passed Proposition 22, which created a carve-out from AB 5 for app-based rideshare and delivery drivers. This means drivers for companies like Uber, Lyft, DoorDash, and Instacart are classified as independent contractors under Prop 22, despite the ABC test.

But Prop 22 is narrow. It only applies to app-based transportation and delivery companies. It does not apply to tech workers, designers, writers, marketers, consultants, or other contractors at San Francisco companies. If you're not driving for a rideshare or delivery app, Prop 22 doesn't affect your classification analysis.

And even Prop 22 workers have some protections, including minimum earnings guarantees, healthcare subsidies for qualifying drivers, and occupational accident insurance. If you're a gig worker and those benefits weren't provided, you may still have claims.

The Severance Offer Itself Is Evidence

Here's something worth noting. If you were classified as a contractor and the company is offering you a "severance" agreement with a release of claims, that's unusual. Real independent contractors don't get severance. The fact that the company is treating your departure like an employee termination, with a release and a payment, suggests they may know the classification was wrong. The offer itself can be used as evidence that the relationship was actually one of employment.

What to Do Next

Don't sign the release yet. If you were misclassified, your claims could be worth far more than whatever the company is offering. Unpaid overtime, missed breaks, expense reimbursement, and penalties can easily reach five or six figures for a worker who spent a year or more at a San Francisco company.

An employment attorney can evaluate your classification, calculate your potential claims, and help you use that leverage in the severance negotiation. Contact our team for a free consultation. We represent workers throughout San Francisco and the Bay Area.