By:  Lizbeth V. West

As many California employers are learning the hard way these days, the misclassification of workers as independent contractors rather than employees can have far reaching consequences when an employer is audited by different governmental agencies during either a random audit or an audit that is prompted in response to a claim that has been filed. For example, not only can an employer be at risk for enforcement action by the Employment Development Department (EDD) for failing to withhold personal income taxes as well as unemployment and disability contributions, but it can also be exposed to liability for failing to comply with California’s wage and hour obligations if the Labor Commissioner’s Office determines the workers are misclassified.

In a recent case out of the Fourth Appellate District, however, employers received one bit of good news and that is that if it has been administratively adjudicated in one agency that an employer has properly classified workers as independent contractors (which as a side note, happens very rarely….) other state agencies are bound by that determination under the doctrine of collateral estoppel. (Happy Nails & Spa of Fashion Valley v. Julie A. Su, as Labor Commissioner (7/19/13) 217 Cal. App. 4th 1459.)

Click to see full discussion of case.