Update: Governor Brown Signs California Law Providing Civil Penalties for the Misclassification of Independent Contractors

October 26, 2011

Governor Brown recently signed Senate Bill 459, which provides hefty penalties for any individual or employer that willfully misclassifies an employee as an independent contractor.

The law will impose penalties between $5,000 and $15,000 for each willful misclassification of an independent contractor.  In the event that an employer is found to violate the law, the employer will be required to display prominently on its website (or if the employer doesn’t have a website, then in an area accessible to all employees and the general public) a notice that provides the following information: (a) that the employer has committed a serious violation of the law by engaging in the willful misclassification of its employees; (b) that the employer has changed its business practices to avoid committing further violations; (c) that any employee who believes he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency (providing the contact number of the agency); and (d) that the notice is being posted pursuant to a state order.

Employers must be diligent about auditing their independent contractors to ensure they are working according to the terms of their contracts.  The financial impact from this law on a company in violation could be crippling, and it is advisable that companies work with an experienced employment law attorney to review their current roster of independent contractors and properly classify each employee/contractor.

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