Have independent contractors? Beware!

  • By: Ruth Evans, Owner of The Evans HR GROUP

In previous articles I’ve talked about the danger of misclassifying employees as Independent Contractors, and now there is another reason to take extra care in making this classification determination.  The California Secretary of Labor and the federal Department of Labor have joined forces to target misclassification of employees as Independent Contractors.  Their purpose is to “protect the rights of employees.”

This targeted enforcement effort along with California’s new law (SB 459, 2012) that made it unlawful to “willfully” (voluntarily and knowingly) misclassify an individual as an Independent Contractor to avoid employee status, is cause for concern and makes it time for employers using Independent Contractors to take a second look at whether the classification is correct.

The civil penalty for violation of this law ranges from $5,000 to $25,000.  Other remedies include requiring the employer to post on its website or in the workplace a notice that a serious violation of misclassification occurred.    In addition to penalizing the employer for the misclassification, the law imposes a joint liability on the person who is retained to assist with classification and knowingly advises an employer to treat an individual as an Independent Contractor to avoid employee status. This does not apply to an attorney, but does apply to a non-attorney consultant.

Misclassification of employees as independent contractors may result in liability for unpaid wages for a period of up to three years including potential overtime pay; penalties for not providing itemized wage statements; retroactive payment of vacation, pension contributions and health insurance benefits; liability for failure to provide FMLA leave; and liability for unpaid unemployment insurance contributions; penalties for failure to provide workers compensation, and payment of workers’ compensation premiums from the date of hire; and other fines and taxes including taxes owed to the IRS.

Protect your Company against potential liability…..take time to ensure that you do not have employees misclassified as Independent Contractors.


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