Labor Code section 226.8 has long prohibited the willful misclassification of an employee as an independent contractor, as well as the charging of fees to, or deducting for goods, materials, space rental, services, government licenses, repairs, or equipment maintenance from the compensation of, these persons.  The Labor Commissioner or a public prosecutor is permitted to recover penalties available under this section and can also recover these penalties as damages for the employee.  Effective January 1, 2027, Senate Bill 1444 will, in addition to an extensive list of more obscure changes, amend 226.8 to allow individual employees to directly collect these penalties. 

More specifically, the employee may recover from the employer a penalty of $5,000 to $15,000 for each violation under Labor Code section 226.8.  If it is determined that the employer engaged in a pattern or practice of these violations, the penalty is increased to a minimum of $10,000 and a maximum of $25,000 for each violation.  These penalties are in addition to other damages and penalties that the employee might recover, but the employee may not recover 226.8 penalties in addition penalties under the Private Attorneys General Act for the same violation. 

In addition to collecting penalties, the public announcement provisions set forth in Labor Code section 226.8 remain in place.  These require that the Labor and Workforce Development Agency or a court, as appropriate, order that the employer display prominently on its internet website or, if the employer has no website, in an area accessible to all employees and the general public at each location where a violation occurred, a notice that states that: the LWDA or court has found that the employer committed a serious violation of the law by engaging in the willful misclassification of employees; the employer has changed its business practices to avoid future violations; any employee who believes that they are being misclassified may contact the LWDA; and that the notice is posted pursuant to a state order.  The notice must include the contact information for the LWDA and must be signed by an officer or owner of the employer.  The notice must remain posted for a period of one year. 

As California employers know, ever since the California Supreme Court clarified existing law to apply the ABC test to determine employee versus independent contractor status in the landmark case of Dynamex Operations West, Inc. v. Superior Court in 2018, misclassification claims have become more common and easier to prove.  SB 1444 offers California employers additional incentive to review the classification of their independent contractor relationships and make any necessary changes before the law becomes effective.

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