Notice: Effective January 1, 2012
You May Be Jointly Liable For Assisting A Client In Making An Erroneous Determination Of Independent Contractor Status
Effective January 1, 2012, California has added new laws regarding the "willful misclassification" of employees as independent contractors. Labor Code §226.8 provides significant fines for employers who willfully misclassify employees as independent contractors ($5,000 - $15,000 for each violation and $10,000 - $25,000 for each violation if there is a pattern and practice). It is unclear how "willful" will be defined by the state administrative agency or the Courts. Labor Code §2753 was also added and is entitled, "Liability of person who advises employer to treat individual as independent contractor to avoid employee status." Under this section, a person who receives money or other valuable consideration, "shall" be jointly and severally liable if they knowingly advise an employer to treat an individual as an independent contractor to avoid employee status. Attorneys and individuals who are employed by the employer are exempt. Business advisors, including accountants, are not exempt. Since many employers bring their "accounting" and business issues to the attention of their business advisors or accountants at tax time and throughout the year, we wanted to make sure that you are aware of these new laws so that you do not get dragged into litigation and potentially become liable for "willful" misclassifications.
To inquire about the subject matter of this notice, please contact Leonard Brazil or Deborah H. Petito of the Clark & Trevithick labor & employment practice.