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December 14, 2011

Employers that willfully misclassify workers as independent contractors instead of employees could face new fines and enforcement actions from state regulators or individuals under a new law (S.B. 459) that takes effect Jan. 1, 2012.

S.B. 459 adds a definition of “willful misclassification” to the California Labor Code, giving the Labor and Workforce Development Agency (LWDA) new authority to levy fines against egregious
violators of worker classification rules. The new law defines willful misclassification as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Violators could face civil penalties of $15,000 to $25,000 per violation, depending on whether the violations were repeated. LWDA has the authority to assess fines and liquidated damages.

In addition, individuals can file complaints with the state labor commissioner, asking for a determination that an employer has misclassified them.

The new law also:

  1. Prohibits employers from charging fees or making deductions from pay to workers who have been misclassified as contractors if those deductions would have violated the law if they had been classified as employees;
  2. Requires employers found in violation of the law to post notices about the violation on their websites or display notices prominently in the workplace;
  3. Requires LWDA to notify the Contractors’ State License Board of violations from licensees and requires CSLB to initiate action against the licensee; and
  4. Makes those who get paid to knowingly advise an employer to willfully treat workers as contractors to avoid employee status jointly and severally liable if workers are determined to be misclassified. Lawyers and those who advise their own employers are exempt from the joint and several liability provisions. 12.14.2011

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