A contractor hires a worker who is classified as an independent contractor but actually meets the definition of an employee. The main risk to the contractor is:
Explanation
Status is decided by the ABC test in Labor Code §2775(b)(1) — with the separate construction-subcontractor rules of §2781 — not by what the parties called the arrangement, so a signed independent-contractor agreement settles nothing. A willful misclassification draws a civil penalty of $5,000 to $15,000 per violation under §226.8(b), rising to $10,000 to $25,000 where there is a pattern or practice under §226.8(c), on top of the back wages, unpaid overtime and payroll taxes. There is no free first violation, and under §226.8(d) the order goes to CSLB, which must begin disciplinary action within 30 days. The forum is a state claim or civil action, not federal court.
Law Reference: Labor Code §226.8(b), (c), (d); §2775(b)(1); §2781This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
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