Orange County and San Diego trades: when a 1099 on a jobsite is illegal

Framers, drywall hangers, electricians' helpers, painters, roofers, HVAC installers, landscapers, and demolition crews across Orange County and San Diego County are handed 1099s every week. Construction is the one industry where California wrote a special rule, and it favors the worker more strongly than the general ABC test does.

The construction presumption

Cal. Lab. Code § 2750.5 creates a rebuttable presumption that a worker performing services requiring a contractor's license is an employee. The statute then makes one part of that presumption effectively conclusive: proof of independent-contractor status requires the license. A worker without a license, performing work for which a license is required under Cal. Bus. & Prof. Code § 7000 and following, cannot be an independent contractor as a matter of law.

How Cal. Lab. Code § 2781 actually limits subcontracting

Contractors often point to Cal. Lab. Code § 2781, which exempts bona fide construction subcontracting from the ABC test of Cal. Lab. Code § 2775 and routes the question to S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal. 3d 341 (1989) instead. The exemption is conditional, and each condition must hold.

• The subcontract is in writing, as Cal. Lab. Code § 2781(a) requires.
• The subcontractor is licensed by the Contractors State License Board and the work is within that license's scope.
• The subcontractor holds required business licenses or tax registrations for the jurisdiction where the work is performed.
• The subcontractor maintains its own business location, and contracts directly with customers or is otherwise a genuine business.
• The subcontractor carries its own workers' compensation coverage where it has employees, and is free to hire and fire its own workers.

A crew leader paid in cash who signs no written subcontract, holds no license, and works exclusively for one general contractor satisfies none of it. The exemption fails, Cal. Lab. Code § 2775 applies, and prong B is hopeless for a contractor whose entire business is building.

What jobsite workers recover

Trade work is long-hours work, so the daily thresholds matter: time-and-a-half past 8 hours and double time past 12 in a single day under Cal. Lab. Code § 510. Travel between jobsites in a company truck, mandatory yard call-ins, and loading time before dispatch are hours worked when the employer controls them. Tools, boots, and truck mileage are reimbursable under Cal. Lab. Code § 2802.

Public works add another layer. Cal. Lab. Code § 1720 and following require prevailing wages on covered public projects, Cal. Lab. Code § 1774 requires payment of not less than the specified rate to all workers, and Cal. Lab. Code § 1776 requires certified payroll records. A worker misclassified on a school, transit, or municipal project in Orange or San Diego County may be owed the prevailing rate rather than the rate that was actually paid.

Injuries and the uninsured employer

Misclassification and workers' compensation collide badly. Cal. Lab. Code § 3357 provides that any person rendering service for another is presumed an employee, and Cal. Lab. Code § 3700 requires employers to secure compensation coverage. A worker told 'you're a 1099, use your own insurance' after a jobsite fall may still be a covered employee, and Cal. Lab. Code § 3706 permits a civil action against an employer that failed to secure coverage.

Orange County and San Diego County filing paths

The Labor Commissioner accepts wage claims through its offices serving Orange County in Santa Ana and San Diego County in San Diego, leading to a conference and then a hearing under Cal. Lab. Code § 98. Civil suits go to the Orange County Superior Court in Santa Ana or the San Diego County Superior Court, where Cal. Lab. Code § 1194 provides for fees and costs on wage claims. Retaliation for raising the issue is prohibited by Cal. Lab. Code § 98.6.