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CA Governor Jerry Brown Approves Bill to Increase Willful Employee Misclassification Penalties

October 21, 2011

Our Orange County, California employment lawyers blog has been focusing recently on the topic of employment misclassification in the California workplace and around the country, and how the practice of employee misclassification poses a serious risk to employees and their right to receive important employment benefits, as well as honest employers, who are trying to comply with the state and federal labor and employment laws.

Last week, in recent California employment misclassification news, California Governor Jerry Brown approved Senate Bill 459--a bill that enacts strong penalties on employers who are found to have knowingly or voluntarily misclassified workers as independent contractors.

This new employment misclassification law adds California to the growing list of states across the country that have enacted legislation to fight the misclassification of employees over the past few years. Brown's bill prohibits companies or employers from willfully engaging in misclassifying employees as independent contractors, adding harsh financial penalties with each violation.

The bill also prohibits employers from charging employees who have been misclassified as independent contractors a fee or deducting any amount from their compensation for any purpose, including for materials, goods, services, repairs, rental space, equipment maintenance or any other fees or fines arising from an individual's employment--where any of these acts would have violated the law if the employee had not been clearly misclassified.

Under the bill, the Labor and Workforce Development Agency or a court would be authorized to access civil penalties from the employers violating the law, of at least $5,000 and no more than $15,000 for each violation, in addition to any other fines or penalties permitted by law. If an employer is found to have engaged in the repeated practice of willful misclassification, the penalties will be at least $10,000 and no more than 25,000 for each repeated violation, in addition to any other fines or penalties granted by the law.

Senate Bill 459 also provides that employers will be ordered under the new law to post a comprehensive notice on the company's website, or in a prominent area that is available for all employees to see, that the company engaged in willful employee misclassification, that the employer has changed their practices of business to prevent future violations of the law, and that any employee who believes that they are being misclassified as an independent contractor may contact the agency. Contractors licensed under California's License Law will also be subject to disciplinary action, including possible debarment.

The passing of this bill follows the recent trend of the IRS carefully monitoring worker classification, after an IRS investigation estimated that employment misclassification costs the federal treasury around $2.7 billion per year in unpaid tax revenue. The U.S. Department of Labor (DOL) also estimates that around 30 percent of U.S. companies engage in employee misclassification.

Our Anaheim labor and employment attorney blog recently discussed the jointly signed memorandum of understanding by the DOL and the IRS, to combine departmental efforts to reduce and even eliminate the illegal practice of employment misclassification around the country.

Contact our labor and employment attorneys at Howard Law, PC today, for a free consultation about your workplace rights in Orange County, California.

Senate Bill No. 459, Approved by Governor Jerry Brown, October 9, 2011

Related Web Resources:

The Department of Fair Employment and Housing (DFEH)

U.S. Department of Labor: Wage and Hour Division (WHD), Fair Labor Standards Act (FLSA)

Department of Labor (DOL): Wage and Hour Division (WHD)

California Governor: Office of Governor Edmund G. Brown Jr., Legislative Updates, October 9, 2011

Related Blog Posts:

DOL and IRS Combine Forces to Combat Employee Misclassification, California Employment Lawyers Blog, September 26, 2011

New Act to Combat Employee Misclassification and Payroll Fraud, California Employment Lawyers Blog, May 4, 2011

Senator Harkin Introduces Payroll Fraud Prevention Act in Congress, California Employment Lawyers Blog, April 28, 2011

NY Governor Signs Employee Misclassification Act into Law, California Employment Lawyers Blog, October 29, 2010

New State Legislation Holds Employers Accountable for Employee Misclassification, California Employment Lawyers Blog, October 25, 2010

Missouri Falls Behind Other U.S. States in Identifying Employee Misclassification, California Employment Lawyers Blog, October 13, 2010

Senator Harkin Aims to "Level the Playing Field" to Protect Workers And Businesses from Employee Misclassification, California Employment Lawyers Blog, June 23, 2010

California Rep. Lynn Woolsey Fights Employee Misclassification with EMPA, California Employment Lawyers Blog, May 27, 2010