SB 459: California Cracks Down on
Worker Misclassification

On October 9, 2011 California Governor Jerry Brown signed
Senate Bill 459 (SB 459) into law. The new California labor
law is designed to crack down on the misclassification
of workers as independent contractors and dramatically
increases the penalties on employers who have been found
to have willfully done so. The new law also extends to "non-lawyer advisors" who knowingly counseled employers to engage in the misclassification.

SB 459 will appear as Sections 226.8 and 2753 of the California Labor Code. In summary, the new law:

1. Prohibits the willful misclassification of workers as independent contractors to avoid properly classifying them as employees;

2. Prohibits charging misclassification workers any fees or making deductions from their compensation where those acts would have violated the law if the individuals had not been mischaracterized;

3. Gives the Labor and Workforce Development Agency authority to assess penalties and take other action against violators, and requires it to report violators who are licensed contractors to the Contractors' State License Board;

4. Requires the Contractors' State License Board, once notified, to bring an action against the contractor.

The new legislation will subject first-time violators to penalties of $5,000 to $15,000 per violation, in addition to any other penalties or fines permitted by law. Repeat violators can be subject to penalties as high as $25,000 FOR EACH INDIVIDUAL VIOLATION.

Furthermore, the law mandates additional record keeping and notice requirements, and, according to the California Chamber of Commerce, "the [final] bill still falls short of adequately protecting employers that are trying to comply with the law, yet mistakenly miscasts and individual as an independent contractor."

The most important question to ask when determining if a worker is an employee or independent contractor is ultimately how much control the employer maintains over the worker and the specific details of the work.