California Labor Code § 226.8 LC prohibits employers from knowingly and voluntarily misclassifying employees as independent contractors. Each violation carries a civil penalty of $5,000 to $15,000.
However if a court of law or the LWDA (Labor and Workforce Development Agency) finds that the employer was engaging in a pattern and practice of violating LC 226.8, then each misclassification carries a $10,000 to $25,000 fine.
Furthermore, employers cannot charge employees whom they willfully misclassified as independent contractors any fees – or make deductions from their compensation – for any of the following items arising from their employment:
- goods,
- materials,
- space rental,
- services,
- government licenses,
- equipment maintenance, and
- fines.
LC 226.8 levies fines for employers who willfully misclassify employees as independent contractors.
Frequently asked questions
What is the purpose of California Labor Code § 226.8?
It prohibits employers from willfully misclassifying employees as independent contractors. It aims to protect workers’ rights and prevent employers from evading their legal obligations.
Can employees waive out of California Labor Code § 226.8?
No, employees cannot waive their rights under LC 226.8. Any agreement to do so would be considered void and unenforceable.
Can employees be fired for pointing out a violation?
No, an employer cannot legally fire an employee for pointing out a violation of California Labor Code § 226.8. Such an action would be considered retaliation and is prohibited under California law.
What if the employer did not willfully misclassify an employee?
Even if an employer did not willfully violate LC 226.8, they may still face penalties. However, the penalties may be reduced if the employer can demonstrate that the violation was unintentional and they took steps to rectify the situation.
Who gets paid the civil penalties?
The civil penalties for LC 226.8 violations are paid to California’s Labor and Workforce Development Agency. A portion of the penalties may also be awarded to the aggrieved employees as part of a successful lawsuit.
Legal References
- California Labor Code 226.8 LC – Unlawful activities; Penalties; Disciplinary action; Information to be posted on Internet Web site; Enforcement.
The full text of the statute reads as follows:
226.8. (a) It is unlawful for any person or employer to engage in any of the following activities:
(1) Willful misclassification of an individual as an independent contractor.
(2) Charging an individual who has been willfully misclassified as an independent contractor a fee, or making 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 any of the acts described in this paragraph would have violated the law if the individual had not been misclassified.
(b) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has engaged in any of the enumerated violations of subdivision (a), the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law.
(c) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has engaged in any of the enumerated violations of subdivision (a) and the person or employer has engaged in or is engaging in a pattern or practice of these violations, the person or employer shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation, in addition to any other penalties or fines permitted by law.
(d)
(1) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer that is a licensed contractor pursuant to the Contractors’ State License Law has violated subdivision (a), the agency, in addition to any other remedy that has been ordered, shall transmit a certified copy of the order to the Contractors’ State License Board.
(2) The registrar of the Contractors’ State License Board shall initiate disciplinary action against a licensee within 30 days of receiving a certified copy of an agency or court order that resulted in disbarment pursuant to paragraph (1).
(e) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has violated subdivision (a), the agency or court, in addition to any other remedy that has been ordered, shall order the person or employer to display prominently on its Internet Web site, in an area which is accessible to all employees and the general public, or, if the person or employer does not have an Internet Web site, to display prominently in an area that is accessible to all employees and the general public at each location where a violation of subdivision (a) occurred, a notice that sets forth all of the following:
(1) That the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees.
(2) That the person or employer has changed its business practices in order to avoid committing further violations of this section.
(3) That any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency. The notice shall include the mailing address, email address, and telephone number of the agency.
(4) That the notice is being posted pursuant to a state order.
(f) In addition to including the information specified in subdivision (e), a person or employer also shall satisfy the following requirements in preparing the notice:
(1) An officer shall sign the notice.
(2) It shall post the notice for one year commencing with the date of the final decision and order.
(g)
(1) In accordance with the procedures specified in Sections 98 to 98.2, inclusive, the Labor Commissioner may issue a determination that a person or employer has violated subdivision (a).
(2) If, upon inspection or investigation, the Labor Commissioner determines that a person or employer has violated subdivision (a), the Labor Commissioner may issue a citation to assess penalties set forth in subdivisions (b) and (c) in addition to any other penalties or damages that are otherwise available at law. The procedures for issuing, contesting, and enforcing judgments shall be the same as those set forth in Section 1197.1.
(3) The Labor Commissioner may enforce this section pursuant to Section 98 or in a civil suit.
(h) Any administrative or civil penalty pursuant to subdivision (b) or (c) or disciplinary action pursuant to subdivision (d) or (e) shall remain in effect against any successor corporation, owner, or business entity that satisfies both of the following:
(1) Has one or more of the same principals or officers as the person or employer subject to the penalty or action.
(2) Is engaged in the same or a similar business as the person or employer subject to the penalty or action.
(i) For purposes of this section, the following definitions apply:
(1) “Determination” means an order, decision, award, or citation issued by an agency or a court of competent jurisdiction for which the time to appeal has expired and for which no appeal is pending.
(2) “Labor and Workforce Development Agency” means the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, or agencies.
(3) “Officer” means the chief executive officer, president, any vice president in charge of a principal business unit, division, or function, or any other officer of the corporation who performs a policymaking function. If the employer is a partnership, “officer” means a partner. If the employer is a sole proprietor, “officer” means the owner.
(4) “Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.
(j) Nothing in this section is intended to limit any rights or remedies otherwise available at law.See also: Villalpando v. Exel Direct Inc. (N.D. Cal. Mar. 28, 2014) Case No. 12-cv-04137 JCS; Provost v. YourMechanic, Inc. (Cal. App. 4th Dist., 2020), 269 Cal. Rptr. 3d 903, 55 Cal. App. 5th 982; Fed. R. Civ. P. 23(b)(3); Bowerman v. Field Asset Servs., Inc., (9th Cir., 2022) 39 F.4th 652; Jose J. Mejia, et al. v. Roussos Construction, Inc. (Court of Appeal of California, Third Appellate District, 2022) 76 Cal. App. 5th 811.