Misclassifying an employee as an independent contractor is a costly mistake — which a home health care service company recently learned when the California Labor Commissioner cited them more than $2.3 million for misclassifying their caregivers as independent contractors. This case is a good reminder for employers to classify their workers as employees or independent contractors properly.
These steep citations are the first issued under a new law that allows the state to collect damages payable to affected misclassified workers. Previously, civil penalties collected from employers were solely payable to the state.
California employers need to know that simply calling a person an “independent contractor” does not mean that the person actually is one in the eyes of federal and state wage-and-hour enforcement agencies. These agencies use strict tests — like California’s ABC Test or the federal Department of Labor’s 2024 rule — to determine whether the employment relationship meets the applicable legal requirements.
Workers who believe they have been misclassified or underpaid are protected from employer retaliation when they file a wage claim or report violations with the Labor Commissioner’s Office, which is what happened in this case.
After the Labor Commissioner’s office received a referral of suspected worker misclassification, its investigation uncovered multiple labor law violations, including:
- $422,033 in unpaid minimum wages*
- $424,809 in unpaid overtime wages*
- $165,162 in meal and rest period premiums*
- $27,400 in wage statement penalties
- $108,094 in waiting time penalties for delayed final wages
- $550,000 in penalties for willful worker misclassification
- $81,673 in penalties for no workers’ compensation insurance for the misclassified employees
- $422,033 in liquidated damages
- $18,950 for other civil penalties
The total amount cited was $2,327,257, which includes interest and additional penalties, with $2,203,384 payable to the misclassified workers.
It’s strongly recommended that employers seek legal counsel when classifying workers as independent contractors as misclassification penalties can be severe — as this citation demonstrates.
Katie Culliton, Editor, CalChamber
CalChamber members can read more about independent contractors in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
*Includes interest payable to the misclassified employees
