California Increases Penalties for Independent Contractor Misclassification

The classification of a new hire as an independent contractor should not be made rashly.  Although it might be attractive, from an employer’s perspective, to avoid paying worker’s compensation insurance, paying for mileage reimbursement or other kinds of industry-related business expenses, the financial consequences of misclassifying an employee can be staggering when an employee sues.

Any employer who considers the use of independent contractors, or has already incorporated this classification into their business model, should re-think their decision, especially in light of newly added Labor Code Sections 226.8 and 2753, which prohibits employers from willfully misclassifying a person as an independent contractor — subjecting employers to civil penalties of between five thousand to fifteen thousand dollars per violation.

The new law, signed by Governor Jerry Brown on October 9, 2011, imposes civil penalties from $5,000 to $25,000 per violation and requires businesses to publicize violations on their company websites.

READ MORE >>>