California and Other States Take a Hard Line Against Misclassification of Employees as Independent Contractors

California’s labor and wage laws, along with numerous other states, have taken aim at a major problem that has developed over many years in employment / wage and hour law. In order to avoid paying overtime wages and certain taxes, employers will misclassify employees as independent contractors. This practice is illegal, and states are fighting back against these employers.

In the past two years, 11 different states have passed laws increasing penalties for misclassification or limiting the use of independent contractors. This brings the total to 21 different states that have targeted employee misclassification by statute to protect workers, including five of the six most populous states in the country(California, Florida, Illinois, New York, and Pennsylvania).

California has led the way in fighting misclassification. California has long been known for its wage and labor laws that provide greater protections for workers than federal wage and labor laws. Its legislature recently enacted the Independent Contractor Misclassification Law. This statute increases penalties for willful misclassification from just $5,000 per violation, to as much as $25,000 per violation. Additionally, even third-party advisors, such as accountants or HR professionals, may be held liable. Finally, a violator of this law must prominently display notice of the violation on the home page of its website, an obvious blemish on an employer’s reputation.

States are even targeting specific industries in which workers are more susceptible to misclassification. For instance, Pennsylvania’s Construction Workplace Misclassification Act is directed at workers in the construction industry, where Pennsylvania has determined misclassification is a serious problem that needs specific attention.

Other industries where the misclassification of employees as independent contractors to avoid the payment of overtime pay, benefits and payroll taxes has historically been an issue include:

• Oil and Gas Drilling/Exploration • Engineering Services • Disaster Clean-Up • IT / Technical Support • Field Service

Regardless of whether these laws apply broadly or to an individual industry, states are increasing protection for workers and penalties for employers that violate the law. Workers who have been misclassified as independent contractors – and thus denied overtime pay and minimum wage protections – should contact an experienced wage and hour attorney to find out more about how to recover the back wages they are legally entitled to. If you believe that you may have been misclassified as an independent contractor and are due unpaid overtime, please fill out our Case Evaluation form, and one of our overtime attorneys will help you to evaluate your case.

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