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Independent Contractor Misclassification Can Be Expensive

Picture of several gold bars, symbolizing the cost of misclassifying an independent contractor

I have written several times about potential undesirable consequences of misclassifying an employee as an independent contractor. It’s time for an update.

In 2012, California Labor Code Section 226.8 took effect. That statute is directed toward willful (i.e., voluntary and knowing) misclassification of employees as independent contractors. Consequences can include the following.

  • Civil penalties of $5,000-15,000 per violation.
  • If there is a pattern or practice of such misclassification, civil penalties of $10,000-25,000 per violation.
  • An obligation to display to the public and to employees a notice acknowledging the violation and providing information for employee reporting of suspected misclassification.

Section 226.8 became law around the same time that the U.S. Department of Labor entered into agreements with the Internal Revenue Service, California and other states to crack down on misclassification.

Many thanks to employment lawyer and fellow Bay Area Business Attorneys Network member Maki Daijogo for providing this information at a recent BABAN meeting.

Photo credit: iStockphoto

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
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