Senate Bill 459 – The Scarlet Letter

November 21, 2011Comments Off on Senate Bill 459 – The Scarlet Letter

The thinking behind the infamous scarlet letter is alive and well in California government.

Last month Gov. Brown signed into law Senate Bill 459, concerning the misclassification of workers. In addition to the large fines for willful misclasification (up to $25,000 per violation), employers must post a notice on their website and “displayed prominently” in an area that is “accessible to all employees and the general public at each location where a violation. . .occurred.”

The notice, which must be signed by a corporate officer, must state:

  1. That the employer has been found to have “committed a serious violation of the law by engaging in the willful misclassification of employees,”
  2. that the employer has “changed its business practices to avoid committing further violations,”
  3. that any employee who believes he or she is being misclassified may contact the state Labor and Workforce Development Agency, whose mailing address, email address and telephone number must be listed in the notice,
  4. that the notice is being posted “pursuant to a state order.”

The notice must remain posted for one year.

This new law increases the exposure for employers when it comes to independent contractor misclassification issues. Employers are already liable for employment and withholding taxes if found to purposefully misclassify individuals as independent contractors, but this law adds an additional layer of potential claims and penalties. Because of this, employers should work with experienced advisers to review their independent contractor relationships.

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About author:

Scott Macklin, E.A. is an Enrolled Agent at Darrel Whitehead CPAs and has been working in public accounting for over 15 years. Scott specializes in corporate taxation and consulting, primarily on start-up infrastructure, technology, and international tax reporting.

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