Labor & Employment Law: Looking Forward To 2012

With the stroke of several employee-friendly pens, Governor Brown enacted a number of new laws pertaining to employment in California. Most of these laws, which put increased burdens on employers, will take effect on January 1, 2012. This provides a brief synopsis of the aspects of these new employment laws that are most likely to affect your business.

1. Independent Contractors

   Beginning on January 1, 2012, Senate Bill No. 459 ("SB 459") significantly increases the penalties that may be assessed against employers who "willfully misclassify" individuals as independent contractors, and imposes a punitive public notice requirement on employers who are found to have misclassified these types of employees.

   SB 459 provides, in pertinent part, as follows:

   It is unlawful for any person or employer to willfully (defined as "voluntarily and knowingly") misclassify an individual as an independent contractor. It is unlawful for any person or employer to charge an individual who has been willfully misclassified as an independent contractor a fee, or make any deductions from compensation, for any purpose, including for goods, materials, space rental, services, government licenses, repairs equipment maintenance, or fines arising from the individual's employment, where those acts would have violated the law if the individual had not been misclassified. Any person (other than an employee or attorney) who knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for that individual shall be jointly and severally liable if the individual is found not to be an independent contractor. In addition to any other penalties or fines permitted by law, employers who violate SB 459 may be subject to civil penalties of $5,000.00 – $15,000.00 per violation. This may be increased to $10,000.00 –$25,000.00 per violation if an established pattern or practice of misclassification is found. SB 459 also requires that an employer who is found to have violated the law prominently display a notice on its Internet website, or if the employer does not have a website, in an area accessible to employees and the general public, for a period of one year that states:

   The employer has committed a serious violation of the law by engaging in the willful misclassification of employees; The employer has changed its business practices in order to avoid committing further violations; ny employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency; and The notice is being posted pursuant to a state order. SB 459 also makes it difficult for employers to take advantage of the Voluntary Classification Settlement Program initiated by the IRS, which allows employers to voluntarily reclassify their independent contractors as employees in exchange for reduced federal payroll tax liability, because participation in this federal program might be seen as an admission of misclassification that could be used against employers in state actions involving SB 459.

   In advance of the New Year, employers who treat individuals as independent contractors should review their job classifications and consult with legal counsel to ensure that all independent contractors are properly classified and, if they are not, to determine the best course of action for implementing a reclassification.

2. Wage...