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Tag: Stiff

Stiff New Penalties for Misclassification of Independent Contractors

There has been a trend in recent years for companies to treat workers as independent contractors in order to avoid the administrative responsibilities and extra costs applicable to employees (payroll taxes, workers’ compensation insurance, unemployment insurance, overtime pay, and various employee benefits). In response, both the Internal Revenue Service and state agencies have stepped up compliance audits to check whether businesses are properly classifying their workers. An employer who has made incorrect classifications faces an array of governmental fines and penalties, as well as liability to the misclassified workers.

California has raised the stakes with a new law, effective January 1, 2012, which adds Sections 226.8 and 2753 to the Labor Code. Section 226.8 prohibits any person or employer from willfully misclassifying an individual as an independent contractor, or from making any charges or compensation deductions (e.g., for goods, materials, or space rental) to such individual if it would be … Read More