BILL NUMBER: SB 459 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JULY 12, 2011
AMENDED IN SENATE MAY 27, 2011
AMENDED IN SENATE MARCH 23, 2011
INTRODUCED BY Senator Corbett
FEBRUARY 16, 2011
An act to amend Sections 1174.5 and 1175 of, and to add Sections
226.8, 1174.1, and 2753 to, the Labor Code, and to add Section 9620
to the Unemployment Insurance Code, relating to employment.
LEGISLATIVE COUNSEL'S DIGEST
SB 459, as amended, Corbett. Employment: independent contractors.
(1) Existing law prescribes comprehensive requirements relating to
minimum wages, overtime compensation, and standards for working
conditions for the protection of employees applicable to an
employment relationship.
This bill would prohibit willful misclassification, as defined, of
individuals as independent contractors. The bill would authorize the
Labor and Workforce Development Agency to assess specified civil
penalties from persons or employers violating the bill.
This bill would provide that a person who, for money or other
valuable consideration, knowingly advises an employer to treat an
individual as an independent contractor to avoid employee status for
the individual shall be jointly and severally liable with the
employer if the individual is not found to be an independent
contractor. This bill would exempt from the provisions regarding
joint and several liability a person who provides advice to his or
her employer or an attorney who provides legal advice in the course
of practicing law.
(2) Existing law requires every person employing labor in this
state to furnish reports or information to the Industrial Welfare
Commission. Existing law requires that person to permit a member of
the commission or employees of the Division of Labor Standards
Enforcement within the Department of Industrial Relations free access
to the place of business or employment of that person to secure
information or make an authorized investigation. That person is
required to keep a record showing the names and addresses of all
employees employed, and keep, for a period of not less than 2 years,
at a central location in the state or at the plants or establishments
at which employees are employed, payroll records showing the hours
worked daily by and the wages paid to employees employed at the
respective plants and establishments. Under existing law, a person
who willfully fails to maintain these records or permit a member of
the commission or employees of the division to inspect records is
subject to a civil penalty of $500. A person who neglects or refuses
to furnish the information requested by the commission, refuses
access to his or her place of business, hinders the commission or
employees of the division, or fails to keep any records required by
this provision is guilty of a misdemeanor.
This bill would require a person employing labor in this state to
provide to an individual retained as an independent contractor, when
that individual is retained, a form that includes a notice that the
individual has been retained as an independent contractor, a
statement explaining the impact that the individual's status as an
independent contractor has on his or her tax obligations and
eligibility for labor and employment protections, and a notice of the
individual's ability to seek advice from the Employment Development
Department or the Labor Commissioner as to whether the individual is
properly classified as an independent contractor. The bill would
require the person employing labor in this state to maintain, for a
period of no less than 2 years, records of the independent
contractors retained by that person which include specified
information concerning each independent contractor, and to make these
records available for inspection by a member of the commission or an
employee of the Department of Industrial Relations or the Employment
Development Department. The bill would provide that a person who
willfully fails to maintain these records or permit a member of the
commission or employees of those departments to inspect those records
is subject to a civil penalty of $500. The bill would also provide
that a person who neglects or refuses to furnish information
requested under this provision, refuses access to his or her place of
business, hinders the commission or employees of those departments,
or fails to keep any records required by this provision is guilty of
a misdemeanor. By expanding the definition of an existing crime, the
bill would impose a state-mandated local program.
(3) Under existing law, the Employment Development Department has
the powers and duties necessary to administer the reporting,
collection, refunding to the employer, and enforcement of taxes
required to be withheld by employers.
The bill would additionally require the Employment Development
Department to develop a form that includes a notice to an independent
contractor regarding the impact that status as an independent
contractor has on the individual's tax obligations and eligibility
for labor and employment protections, and a notice that the
independent contractor may seek advice from the Employment
Development Department or Labor Commissioner as to whether the
individual is properly classified as an independent contractor. The
bill would require the Employment Development Department to process a
request for advice by an individual regarding whether that
individual is an independent contractor or employee, and to take all
steps reasonably necessary to carry out the duties described in these
provisions.
(4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 226.8 is added to the Labor Code, to read:
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
the employer would have been in violation of the law if the
individual had not been misclassified.
(b) If the Labor and Workforce Development Agency, or any of its
departments, divisions, commissions, boards, or agencies, or a court
finds that person has engaged in any of the enumerated violations of
subdivision (a), a civil penalty of not less than five thousand
dollars ($5,000) and not more than fifteen thousand dollars ($15,000)
shall be assessed against the person for each violation, in addition
to any other penalties or fines permitted by law.
(c) If the Labor and Workforce Development Agency, or any of its
departments, divisions, commissions, boards, or agencies, or a court
finds that person has engaged in any of the enumerated violations of
this section subdivision (a) and
there is evidence that the person has engaged in
or is engaging in a pattern or practice of these behaviors, a civil
penalty of not less than ten thousand dollars ($10,000) and not more
than twenty-five thousand dollars ($25,000) shall be assessed against
the person for each violation, in addition to any other penalties or
fines permitted by law.
(d) For purposes of this section, "willful" means
voluntary and intentional voluntarily and knowingly to
avoid employee status for that individual .
(e) Nothing in this section is intended to limit any rights or
remedies otherwise available at law.
SEC. 2. Section 1174.1 is added to the Labor Code, to read:
1174.1. (a) A person employing labor in this state shall provide
to an individual retained as an independent contractor, when the
individual is retained, a form developed by the Employment
Development Department that includes all of the following:
(1) A notice that the individual has been retained as an
independent contractor.
(2) The factors the Employment Development Department uses to
determine whether an individual is an employee or an independent
contractor.
(3) A statement explaining the impact that the individual's status
as an independent contractor has on his or her tax obligations and
his or her eligibility for labor and employment protections.
(4) A notice of the individual's ability to seek advice from the
Employment Development Department or the Labor Commissioner as to
whether that individual is properly classified as an independent
contractor. The notice shall provide the telephone number for both
the Employment Development Department and the Labor Commissioner.
(b) (1) A person employing labor in this state shall maintain, for
not less than two years, records of all independent contractors
retained by that person. The records shall include the name, address,
social security number, and, if applicable, federal tax
identification number of each independent contractor.
(2) A person employing labor in this state shall make the records
described in paragraph (1) available, upon request, for inspection by
a member of the commission or an employee of the Department of
Industrial Relations or the Employment Development Department.
SEC. 3. Section 1174.5 of the Labor Code is amended to read:
1174.5. A person employing labor who willfully fails to maintain,
in an accurate and complete fashion, the records required by
subdivision (c) or (d) of Section 1174 or subdivision (b) of Section
1174.1, or to allow a member of the commission or employees of the
Division of Labor Standards Enforcement to inspect records pursuant
to subdivision (b) of Section 1174 or a member of the commission or
employees of the Department of Industrial Relations or the Employment
Development Department to inspect records pursuant to subdivision
(b) of Section 1174.1, shall be subject to a civil penalty of five
hundred dollars ($500).
SEC. 4. Section 1175 of the Labor Code is amended to read:
1175. A person, or officer or agent thereof, is guilty of a
misdemeanor who does any of the following:
(a) Neglects or refuses to furnish information requested pursuant
to Section 1174 or 1174.1.
(b) Refuses access to his or her place of business or employment
to any member of the commission or employee of the Department of
Industrial Relations or the Employment Development Department when
the member or employee is administering or enforcing this chapter.
(c) Hinders that member or employee from securing information
authorized by Section 1174 or 1174.1.
(d) Fails to keep any of the records required by Section 1174 or
1174.1.
SEC. 5. Section 2753 is added to the Labor Code, to read:
2753. (a) A person who, for money or other valuable
consideration, knowingly advises an employer to treat an individual
as an independent contractor to avoid employee status for that
individual shall be jointly and severally liable with the employer if
the individual is found not to be an independent contractor.
(b) This section does not apply to the following persons:
(1) A person who provides advice to his or her employer.
(2) An attorney authorized to practice law in California or
another United States jurisdiction who provides legal advice in the
course of the practice of law.
SEC. 6. Section 9620 is added to the Unemployment Insurance Code,
to read:
9620. The Employment Development Department also has the
following power and duties:
(a) To develop the form described in subdivision (a) of Section
1174.1 of the Labor Code.
(b) To process a request for advice by an individual as to whether
that individual is an independent contractor or employee.
(c) To take all steps reasonably necessary to carry out the duties
described in Section 1174.1 of the Labor Code.
SEC. 7. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.