Legal Alert: California's New Law Imposes Stiff Penalties on Employers who Misclassify Employees as Independent Contractors


California's Governor Jerry Brown recently signed into law a bill that will dramatically increase penalties for employers who willfully misclassify employees as independent contractors. The new law compels a $5,000 to $25,000 fine for each violation and also prohibits companies from charging fees or making any other deductions from the pay of independent contractors who have misclassified.

Designed to prevent the use of "independent contractors" in place of employees, SB 459 creates a new section in California's Labor Code. The new section makes it unlawful (1) to willfully misclassify an individual as an independent contractor, and (2) to charge misclassified independent contractors fees or make deductions from their compensation for items such as goods, materials, maintenance, licenses, or repairs. An employer who willfully misclassifies an independent contractor may be subject to a penalty of $5,000 to $15,000 for each violation, and, if the employer is found to have engaged in a "pattern and practice" of misclassifying employees as independent contractors, $10,000 to $25,000 for each violation.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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