CALIFORNIA LABOR CODE–Willful Misclassification of Employees as Independent Contractors

This new law makes willful misclassification, defined as avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor, unlawful. It is also unlawful to charge such an individual for equipment, materials, etc. for which it would be a violation of law (because the employer would be required to provide the items) if the individual were not misclassified. Civil penalties for such violations range from $5,000 – $15,000 and then $10,000 – $25,000 if there is a pattern and practice of such violations. Any employer that is found to have violated these provisions will be required to display a notice that enumerates the violations and notifies anyone who believes he/she is misclassified with information for contacting the Labor and Workforce Development Agency. The notice must be signed by an officer and be posted for one year.

What this means for you

All employers should carefully review the basis for classifying anyone as an independent contractor and re-classify individuals as employees if appropriate under the circumstances. Additional information on the efforts of the Department of Labor (DOL) and the Internal Revenue Service (IRS) with regard to the misclassification issue will be the subject of a forthcoming GMK Alert.

If you would like assistance with updating any policies or otherwise implementing these new requirements, please contact GMK employment law attorney Jeanne Flaherty at 818-755-0444 or jflaherty@gmklaw.com.