Protection Against Employee Misclassification

Alert number: 
1
March 23, 2012

New Law: SB459

In 2011 Governor Brown signed SB 459, which imposes serious penalties on employers who misclassify workers as “independent contractors.” Effective immediately, employers who “willfully” misclassify their workers are:

  • subject to fines ranging from $5,000 to $25,000 for each violation;
  • barred from charging workers a fee or making any deductions from a worker’s compensation where such a fee or deduction would have been illegal if the person was classified as an employee;
  • required to post, on their website or in another manner accessible to their employees and the general public, a notice that they have been found guilty of misclassifying workers (if the California Labor and Workforce Development Agency [LWDA] or a court finds that an employer has violated the statute). The notice also will invite workers who believe they have been misclassified to contact the LWDA.

Under the new law, a ‘willful’ misclassification occurs when an employer avoids “employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Effect on Low-Wage Workers

Employers occasionally misclassify workers as “independent contractors” to avoid being governed by various employment laws, including those covering workers’ compensation, unemployment insurance, discrimination, harassment, leave of absence protections, and wage/hour rules. For example, a cleaning service company may intentionally label its janitors as independent contractors to avoid the cost of providing cleaning supplies to the janitors that would have been required if they were employees. Under SB 459, those janitors would be able to recover the cost of any cleaning supplies they purchased themselves when they were misclassified as contractors.

SB 459 creates a powerful disincentive for employers to continue to such practices. The “Scarlet Letter” posting requirement is especially meaningful because it provides workers with information regarding on-site violations of the statute, and a vehicle for remedying any misclassifications. Workers who believe they may have been misclassified should contact the LWDA to remedy their misclassification and to recover any fees that they might have paid due to their misclassification.

FURTHER INFORMATION

You can find free information about independent contractor classification on our website.

Workers can also contact the Workers’ Rights Clinic at 415. 864. 8208 or at our toll-free number: 866. 864. 8208.

This alert is intended as an information source for clients and friends of Legal Aid Society-Employment Law Center. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. This material may be considered advertising under certain rules of professional conduct.