In California, when workers claiming to have been misclassified as independent contractors seek redress from the California Labor Commission, they will most likely be deemed to be employees, and the de facto employer of those workers should have treated them as employees and now owes unpaid salary and penalties. Under California Labor Code Section 226.8 it is unlawful for an employer to voluntarily and knowingly misclassify a worker as an independent contractor rather than an employee, and the commission can assess hefty penalties against those employers.
This liability may extend to other companies involved in some material way with the complaining workers. 2015’s Noe v. Superior Court (Levy Premium Foodservice Ltd. Partnership) (June 2015), confirmed that businesses found to be co-employers or joint employers can also be liable for wages and penalties as a result of that misclassification. In that case, the owner of the Staples Center contracted with a Levy Premium Foodservice to provide food service workers at the venue. That entity contracted with other entities to provide the workers. Workers filed a wage and hour class action lawsuit against all of the entities, alleging several labor code violations as a result of misclassification of the workers as independent contractors, including failure to pay minimum wage, provide accurate wage records, and pay up all wages on termination of employment. The court allowed the case to proceed against all the business entities, not just the owner of the venue, which had decided to engage independent contractors, but also the entities that supplied the workers.
Previously in Martinez v. Combs (2010) the California Supreme Court confirmed that California will apply a broad definition of “employ” similar to the FLSA’s “suffer and permit” test. The test in California is the test used by the Industrial Welfare Commission in California (the regulatory agency that regulates wage and hour laws in California, including publishing wage orders), which is “one who exercises control over the wages, hours, or working conditions of the employee; or suffers or permits the employee to work; or engages the employee.” Using the broad IWC defintion of employer, an entity or a person who might not be thought of or treated in business records as the actual employer may deemed the employer under the law. In Martinez, a group of seasonal agricultural workers was hired to work in a strawberry grower’s fields. When the grower filed bankruptcy the workers tried to recover wages from the broker who had contracted with the grower to distribute the product. They were not successful, because the court found the broker did not have the right to hire or fire, set wages and hours, or tell the workers when and where to work, and the broker did not exert control over the wages and hours. Still, with the test of whether a business is an employer turns on whether the person or business “suffers or permits” the worker to work, as well on the degree of control exerted over the work, this may make it easier for plaintiffs in wage and hour cases to hold a company responsible for their wages when a different entity was nominally the actual employer.