Consequences of Misclassification

Q: Suppose the Labor Commissioner or a judge determine that my contractors should have been classified as employees, what are the consequences?
A: There are many, but these are probably the most important:

• Stop orders and penalty assessments pursuant to Labor Code § 3710.1;
• Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Industrial Welfare Commission Orders;
• Exposure for tort liability for injuries suffered by employees when workers compensation insurance is not secured (Labor Code § 3706);
• Exposure for unfair business practices (Business & Professions Code § 17200);
• Tax liability and penalties;
• Criminal liability (Labor Code § 3700.5).

When in doubt, treat them as employees.

Comments

[BP]

I have represented numerous clients who have been accused of misclassifying employees as independent contractors. By far, the worst consequences my employer clients have faced is at the hand of the Employment Development Department (EDD) - who is merciless in assessing tax, interest, and more PENALTIES than you could imagine.