The Department of Labor and Employment has submitted a draft proposed rule to establish fines associated with employee misclassification. If this rule is approved and enacted, an employer who willfully misclassified an employee as an independent contractor will be fined by the CDLE. The CDLE will fine first offenders 5% of each misclassified employees annual gross wages or $100, which ever is greater. Also, repeat offenders will be fined 25% of each misclassified employees annual gross wages or $500, whichever is greater. This is just the fine; employers should expect to pay the unemployment taxes on these misclassified employees as well as having the IRS and state revenue department being notified.
If you have questions concerning employee and independent contractor classifications feel free to contact your representative at StaffScapes to discuss further.
The proposed rule or amendment may be found here.