NCL hails CA Gov. Brown for signing new law to combat employee misclassification, an illegal form of wage theft
October 12, 2011
Washington, DC—The nation’s oldest consumer organization, the National Consumers League (NCL), today lauded California Governor Jerry Brown for signing into law Senate Bill 459, an employment bill addressing employee misclassification. NCL has been advocating for tougher wage theft penalties and sent Governor Brown a letter urging him to sign S.B. 459 in September of this year.
The harm caused by employee misclassification—where an employer knowingly classifies an employee as an independent contractor to avoid paying taxes and employee benefits—goes beyond workers and their families to victimize everyone from honest businesses to state treasuries and the federal government. Employees who are misclassified as ‘independent contractors’ are denied key worker rights, such as minimum wage protection, overtime pay, workers’ compensation, unemployment insurance, and anti-discrimination protections.
Employers who illegally classify their workers as independent contractors shortchange the government by skirting payroll taxes and Social Security & Medicare, while also giving unscrupulous businesses a competitive advantage by enabling them to offer their services at a lower cost than honest employers; leaving lawful businesses paying higher rates of workers’ compensation and losing out on bids.
Between 2005 and 2007, audits conducted by the California Employment Development Department recovered a total of $111,956,556 in payroll tax assessments, $18,537,894 in labor code citations, and $40,348,667 in assessments on employment tax fraud cases. With increases in employee misclassification, California is likely losing out on over $112 million in badly needed state revenue.
California Senate Bill 459 will establish monetary penalties for businesses that misclassify their workers. The new law imposes fines that range from $5,000 to $15,000 for each misclassification violation for first time offenders and $10,000 to $25,000 per violation for repeat offenders.
“Laws like the one recently passed in California are an important step towards ensuring that American workers receive what they are lawfully owed,” said Michell K. McIntyre, Project Director of NCL’s Special Project on Wage Theft. “Wage theft occurs in industries across the board and the only way to fight back is to hit unlawful businesses where it hurts the most- the pocket book.”
To read NCL’s letter to Governor Brown, click here.
About the National Consumers League
The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.