Under California Labor Code § 226.8, it is unlawful for an employer to willfully misclassify a worker as an independent contractor.
If the Labor Commissioner or a court finds that a company has done so, severe penalties apply — and they’re designed to both punish violators and deter future abuse.
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Key Penalties Employers May Face
1. Civil Penalties (Per Violation)
- $5,000–$15,000 per misclassification for first-time violations
- $10,000–$25,000 per misclassification if the employer engaged in a pattern or practice of misclassification
This means if a company misclassifies multiple workers, these fines stack quickly.
2. Public Shaming Requirement (Notice Posting)
If found guilty of willful misclassification, the company must:
- Post a public notice on its website or in a visible workplace location
- The notice must:
- State that the company broke the law
- Confirm that it has changed its business practices
- Provide contact info for the Labor and Workforce Development Agency for workers who believe they’re misclassified
- Be signed by an officer (such as the CEO or President)
- Remain posted for 1 full year
This is intended to deter future violations and warn other workers.
3. Disciplinary Action for Licensed Contractors
If the employer is a licensed contractor under the California Contractors State License Law:
- The case is referred to the Contractors State License Board (CSLB)
- The CSLB must initiate disciplinary action against the business
- This could result in license suspension or revocation
4. Successor Business Liability
Penalties carry over to successor businesses if:
- They share one or more officers or principals with the original company
- They operate in the same or similar line of work
This prevents businesses from dodging accountability by shutting down and reopening under a new name.
5. Additional Remedies and Damages
On top of civil penalties, misclassified workers may also be entitled to:
- Unpaid minimum wages or overtime
- Meal and rest break violations
- Business expense reimbursements
- Waiting time penalties (for unpaid wages at termination)
- Unemployment and disability insurance benefits
- Workers’ compensation coverage for injuries
These are enforced through:
- The Labor Commissioner (DLSE)
- The EDD
- Private lawsuits or class actions
6. Enforceable by Public Prosecutors
District attorneys, city attorneys, and even the Attorney General can:
- Bring civil actions
- Seek injunctive relief
- Collect damages and penalties
This allows the state to pursue violators aggressively, especially in high-profile or large-scale cases.
Definition of “Willful Misclassification”
Defined by law as:
“Avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”
In other words, ignorance isn’t a defense.
If a company should have known based on the law (like the ABC test in AB5), it can be held liable.
What This Means for You (the Worker)
If you were misclassified:
- You may be owed money for unpaid wages, benefits, and penalties
- You can trigger state enforcement and help hold the company accountable
- You might even get a portion of the civil penalty in some whistleblower cases
Where to Start
You can file complaints and start the process through:
- The California Labor Commissioner (DLSE)
- The Employment Development Department (EDD)
- The IRS (for tax misclassification)
- Local authorities (e.g., LA Office of Wage Standards)
- A qualified employment attorney
