New Law—Independent Contractors: Willful Misclassification SB 459 Corbett
By Sandra Gottlieb, Senior Partner SwedelsonGottlieb; Condo Lawyer and HOA Attorney
We know that there is a tendency to classify some condo and HOA staff as independent contractors rather then employees. Some community association boards want to do this because they think that such a classification will mean that their association will not have to pay for all of fees, charges, taxes, etc. that are normally associated with an employee. They also think that they can avoid vacation pay, payroll taxes, medical insurance, etc.
The staff member may want the independent contractor classification as then they believe that they will not have taxes deducted from their checks, that they can then write off their car and other expenses and benefit in other ways.
Well, the government knows what you are doing and they are not happy about it. There has been an increasing effort by the State and Federal governments to address this “problem". The fact is that in many situations, that staff member is not really an independent contractor, as they work full time at the association, use the equipment, etc. provided by the association and get their direction from the association.
SB 459, which becomes law January 1, 2012, adding Sections 226.8 and 2753 to the Labor Code, prohibits willful misclassification of individuals as independent contractors. It prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation where those acts would have violated the law if the individuals had not been mischaracterized.
The bill further authorizes the Labor and Workforce Development Agency (LWDA) to assess specified civil penalties from, and take other specified disciplinary actions against, persons or employers violating these prohibitions.
This new legislation authorizes the Labor Commissioner to issue determinations that a person or employer has violated these prohibitions with regard to an individual filing a complaint, and to assess civil and liquidated damages against a person or employer based on a determination that the person or employer has violated these provisions.
And, the bill provides that any person (manager or management company for example when advising their community association client) who, for money or other valuable consideration, knowingly advises an employer to treat an individual as an independent contractor to avoid employee status shall be jointly and severally liable with the employer if the individual is not found to be an independent contractor.
Exempt from these provisions regarding joint and several liability is any person who provides advice to his or her own employer or an attorney who provides legal advice in the course of practicing law.
So, if the association controls most aspects of a staff member's work, including assignments and scheduling, where they work and what they do, and supplies their equipment etc, then it is likely that staff member is an employee. Remember, if it walks like a duck, and acts like a duck, then . . . You get the point. Be careful out there.
Questions or comments? Sandra Gottlieb can be reached at firstname.lastname@example.org.