On October 9, 2011, California Governor Jerry Brown signed nearly two
dozen new California human resources and labor-related bills into law,
effective this year. Over the next few days I will hightlight the seven most important of these California laws..
SB-459: Worker Misclassification Act. SB-459 is designed to crack down on the misclassification of employees as independent contractors.
California Senate Bill 459, known as the “The Job
Killer Act,” imposes severe penalties on employers who “willfully”
misclassify workers as independent contractors. On the Federal level,
worker misclassification has also been the focus of attention by the
Department of Labor. Labor Secretary Hilda Solis, stated, “The
misclassification of employees as independent contractors is an alarming
trend. The practice is a serious threat to both workers, who are
entitled to good, safe jobs, and to employers who obey the law and are
undercut when others use illegal practices.”
The Labor Department is now sharing information regarding businesses
that misclassify workers with the IRS. The DOL
has hired around 300 investigators to explore wage theft
complaints. The IRS has already collected almost $4 million of back
wages in 2010, during the first of its three-year plan to audit some
6000 randomly selected, various sized companies.
Employers who misclassify employees may face significant penalties,
in addition to employment taxes and benefits. All
employers should review their employee job descriptions and reclassifying
misclassified workers if necessary. The following suggestions should help.
- Read through the Labor Department’s rules and examine workers’ job descriptions to determine whether classifications are correct.
- Review the IRS guidelines. The IRS provides clear eligibility parameters for determining independent contractor status. One must consider all information that helps determine the degree of control and independence maintained by the worker in relation to the company.
