Sometimes, it is an oversight that occurs from the employer’s misunderstanding of the law.
Whether intentional or accidental, employee misclassification is illegal in California, and companies that engage in the practice can face significant penalties.
What is the Employee Misclassification Penalty in California?
California law allows civil penalties to be charged to employers that intentionally misclassify workers.
The fine can range between $5,000 and $15,000 per violation, and if there is a pattern of willful misclassification, the courts can fine employers an additional $10,000 to $25,000.
Backpay Penalties to Misclassified Employees
If an employee is misclassified for the purpose of not being paid minimum wage or overtime pay, the employer can be penalized for up to three years’ worth of backpay the employee would have been entitled to.
Unpaid Wage Penalties to California Workers
Employers that intentionally misclassify employees may be subject to civil penalties for failing to pay them in full or on time.
The penalties can include:
- $100 for the first violation for the failure to pay full wages, for each employee.
- $200 for each subsequent failure to pay violation, for each employee, and an additional 25% fine of the amount unlawfully withheld.
When employers willfully fail to pay final wages on time after a worker’s employment ends, they can be required to pay a full day of wages for each full day that payment is delayed, which can accrue for up to 30 days.
A Wage Statement Penalty
Employers must comply with all recordkeeping requirements of the California Labor Code. That includes providing itemized wage statements to hourly workers. When these records do not exist, due to employee misclassification, not only can the courts order the employer to pay fines, but the workers can sue for failure to comply.
Failure to meet wage statement and recordkeeping requirements in the state of California is also a crime that can be charged as a misdemeanor, which can result in up to a year in jail and fines of up to $1,000.
If an employer owes a worker money due to misclassification, the court can require the company to pay interest on the amount that it owes the worker.
Attorney’s Fees and Court Costs
The courts can order employers to pay attorney’s fees and court costs for employees who have been forced to sue.
Tax & Criminal Penalties Through the IRS
When the IRS determines that a worker is an employee, and not an independent contractor as he or she was misclassified, the government agency can require the employer to pay tax penalties. This is true whether the misclassification was intentional or accidental.
In addition, if the IRS finds that an employer or worker willfully enters an independent contractor arrangement to evade taxes, it is a crime that can be charged as a felony. The penalties include up to five years of prison time and up to $100,000 in fines.
Contact Our Skilled Employment Misclassification Attorneys in Pasadena, California Today
If you believe you have been misclassified as an independent contractor, contact our Pasadena employment misclassification attorneys to discuss the best course of action against your employer today.
Our employment law firm and bilingual staff offer services in both English and Spanish and are available now to discuss your case during a free consultation by calling 626-396-9900 or contacting us online.