Are You An Employee or An Independent Contractor? New California Law Protects Workers from Misclassification

Alert number: 
1
March 23, 2012

Background

Sometimes employers label their workers as “independent contractors” when they are actually “employees.” When that happens, the workers don’t receive some important legal protections and benefits, such as workers’ compensation, unemployment insurance or even minimum wage and overtime payments. The “misclassified” workers can bring claims to recover those lost benefits, including any unpaid minimum wages or overtime, they would have earned as employees.

New Law

Now there is a new California law (SB 459) meant to prevent employers from incorrectly misclassifying workers as independent contractors. Under the new law, an employer who intentionally misclassifies its workers now will also have to pay stiff penalties, ranging from $5,000 to $25,000 for each violation. The employer also will have to post a special notice in the workplace and on its website announcing that it misclassified its workers. These penalties should help stop employers from illegally misclassifying workers to try to save money on wages and benefits.

Example

Ms. X is a janitor working for a cleaning service. Because Ms. X was originally labeled an “independent contractor,” she had to pay for her own cleaning supplies to do her job. If Ms. X learns that she was intentionally misclassified as a contractor, she can bring a claim asking for reimbursement of the cost of the cleaning supplies because she wouldn’t have had to pay for those supplies as an employee. Ms. X’s employer also will have to pay a fine of at least $5,000 and post a notice at the cleaning service facilities and its website stating that it incorrectly misclassified one of its employees.

Claims

If you think you have been misclassified as an independent contractor, you can file a claim at a local office of the California Labor and Workforce Development Agency (LWDA). Those offices are also listed on the LWDA website.

FURTHER INFORMATION

If you don’t know whether you should be an employee or independent contractor, this factsheet has a list of factors to help you decide. If you have additional questions, please contact our Workers’ Right Clinic at 415-864-8208 or toll-free at 866-864-8208.

This alert is intended as an information source for clients and friends of Legal Aid Society-Employment Law Center. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. This material may be considered advertising under certain rules of professional conduct.