Earlier in October, California Governor Jerry Brown signed a new worker classification law imposing significant penalties on employers who misclassify employees.
Effective date – January 1, 2012
Key provisions –
- It is unlawful to voluntarily and knowingly misclassify an individual as an independent contractor.
- It is unlawful to charge the misclassified employee a fee or make any deductions from his/her compensation that would have otherwise violated the law had the employee not been misclassified. For example, an employer may not charge a misclassified employee for use of the employer’s supplies, tools, and equipment.
- It imposes a civil penalty of between $5,000 and $15,000 for each violation of misclassification. Note that the penalties will increase to between $10,000 and $25,000 per violation if the employer is found to have engaged in a pattern of such violations.
- In addition to penalties assessed, violators will be ordered to display a prominent notice of violation on their website for a period of one year to advise employees and the general public of such violations committed.
- It further provides for joint and several liabilities for any person, other than an attorney or an employee, who knowingly advises an employer to misclassify an employee.
- The bill authorizes the Labor and Workforce Development Agency and the Labor Commissioner to issue a determination and assess permitted penalties against violating employers.
- The bill also authorizes individuals to file a complaint with the Labor Commissioner to request a determination on possible worker classification violations concerning the individual filing the complaint.
- Obtain an understanding of the rules for worker classification.
- Review past decisions regarding independent contractor status.
- Develop a corporate policy on engagement and management of independent contractors.
- Establish and execute a written independent contractor agreement for each contractor.
- If independent contractor status is in question, obtain a written legal opinion from counsel.
If you have any questions regarding the new law or the recommendations discussed above, please do not hesitate to contact us.