The United States Department of Labor (“DOL”) and the State of California (“California”) have signed an agreement to reduce the misclassification of employees as independent contractors within in the state’s labor market. According to the California Department of Industrial Relations, employers willfully classify workers as independent contractors to avoid paying payroll taxes, maintaining workers’ compensation coverage, and following wage and hour requirements. Signed December 21, 2011, the agreement outlines a commitment to share information among various federal and state agencies, partner on outreach efforts to educate local businesses about proper classification, and to create other initiatives such as joint-agency investigations of violators. Effective January 1, 2012, with the signing of California Senate Bill 459, employers who willfully misclassify individuals as independent contractors face fines ranging from $5,000-$25,000 per violation. As a result of the agreement between the DOL and California a new law was created to combat the trend of employee misclassification.
See US Labor Department, California sign agreement to reduce misclassification of employees as independent contractors, U.S. Department of Labor (October 25, 2012, 9:00 PM), http://www.dol.gov/opa/media/press/whd/WHD20120257.htm; see also Independent contractor versus employee, California Department of Industrial Relations (October 25, 2012, 9:00 PM), http://www.dir.ca.gov/dlse/faq_independentcontractor.htm; Partnership Agreement Between the U.S. Department of Labor and California Labor and Workforce Development Agency, (October 25, 2012, 9:00 PM), http://www.dol.gov/whd/workers/MOU/ca.pdf; Cal. Lab.Code §226.8 (2012).
(Development authored by Gregory Evans)