California Gov. Jerry Brown has signed a law
imposing penalties on employers who misclassify workers as independent contractors when they should legally be considered employees. Misclassification leads to several forms of wage theft, from employers not paying payroll taxes, benefits or workers compensation, to the nonpayment of overtime or even minimum wage. This costs workers and the government money; according to
Salon:
In 2009, the Government Accountability Office reported that misclassification has cost the U.S. government $2.72 billion. In February, the Obama administration requested $46 million to pay for misclassification enforcement inspectors. After the long summer of budget struggles, that request has since been lowered to $15 million, but the most recent appropriations bill for the Department of Labor drawn up by the GOP-controlled House doesn’t even reference misclassification enforcement, while calling for sharp overall cuts to the Department of Labor budget — cuts that would make it even harder to enforce the labor laws that currently still exist.
The less the government enforces misclassification, the more workers are victimized and the more money the government loses to the practice, which is growing. Secretary of Labor Hilda Solis has prioritized cracking down on the practice, and has collected significant amounts of back pay for misclassified workers. But enforcement obviously remains underfunded and patchy.
The new California law imposes penalties from $5,000 to $25,000 on employers that misclassify workers, "requires violators to post a notice on their company website, holds consultants liable for advising employers to misclassify, and notifies the Contractors State Licensing Board to discipline a contractor who willfully misclassifies." This is a significant win for workers if it's enforced with any kind of vigor.