Sacramento, Calif., (October 12, 2017) – Misclassification of employees is quickly becoming a favorite of the California labor commissioner. In two separate news releases this month, the Department of Industrial Relations (DIR) announced that the Labor Commissioner’s Office filed citations and a lawsuit against two California employers for misclassifying their employees.
On August 9, DIR issued a news release stating that the Labor Commissioner’s Office had cited a Jack in the Box franchise operator for $903,084 in unpaid wages and penalties for misclassifying 40 employees as exempt from overtime. The employees, who all carried the job title of manager, had to work at least 45 hours a week, but were not paid any overtime.
Part of the test to properly classify an employee as exempt from overtime in California is that the employee must spend most of the employee’s work time performing work duties that meet the test for exemption (e.g., directing the work duties of employees, exercising discretion and independent judgment). The labor commissioner’s investigation determined that the employees in question spent most of their work time performing the same work duties as regular employees and should not have been classified as exempt from overtime, despite their job title.
In a second news release dated August 14, the Labor Commissioner’s Office announced it had filed a lawsuit seeking more than $6.3 million against a California construction company for misclassifying employees as independent contractors. The labor commissioner’s investigation found that the construction company had forced its workers to sign contracts stating they were independent contractors, then used two staffing agencies to pay the workers.
The investigation, which lasted some 10 months, revealed that the construction company exercised a sufficient level of control over the workers that they were employees, not independent contractors, and filed a lawsuit seeking unpaid wages and penalties on the workers’ behalf.
What this means for employers: Misclassification of employees can come in many different forms, but all carry significant costs for employers. Employers must take a close look at an employee’s actual work duties and the level of control that the employer exercises over the employee before making the determination to classify the employee as exempt from overtime or as an independent contractor. Employers are encouraged to review their current employee classifications to ensure they comply with all California laws.
The goal of this article is to provide employers with current information on labor and employment law. Its contents should be neither interpreted nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at 559-248-2360 or toll-free at 888-322-2573, for individual responses to questions or concerns regarding any given situation.
Source: Farm Employers Labor Service, Monthly Newsletter Vol. 47, No. 8/9, August/September 2017
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