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I misclassified an employee as Independent Contractors and lost a Labor Board hearing, should I appeal?

Los Gatos, CA |

I own a small hair salon in Los Gatos, California. An employee took me to the labor board claiming she was an employee not an independent contractor. I lost and owe her pay, back pay, damages, interest, and now the Labor Board is fining me. Should I appeal? Are there additional penalties that I will be owed? I am afraid now that the IRS and Franchise Tax Board are going to fine me too! I didn't know I was doing anything wrong; all the salons call their employees Independent Contractors.

Attorney Answers 8


  1. Best answer

    You certainly have the right to appeal the decision against you, which must be done within 10 days of the notice of decision. Add 5 days if it was mailed to you. But consider this: to effectively appeal, in addition to the filing fee you must pay to the court, you also must post a bond with the court in the amount of the award against you to ensure the employee will be paid if you lose your appeal. Furthermore, if the employee hires an attorney and you lose, you will be required to pay the employee's attorney's fees, as well as your own.

    I am guessing you were not represented at the hearing. If true, that was a big mistake. You need an informed legal opinion as to whether you misclassified this employee. There are several factors involved and the hearing officer knows what they are far better than you do. To say all the salons are doing the same thing is not going to help, in fact, it is probably going to hurt your case. Those of us who have practiced employment law for awhile know very well that the salon industry is ripe with such violations and it is quite common for, so called contractors, to be misclassified in this industry. The DLSE knows it too.

    Yes, there can be dire consequences for not deducting payroll taxes, not paying workers compensation insurance and not paying employees as required by California labor laws. That is why it is essential to consult with an employment law specialist who can assess the facts of your situation and advise whether it is worth it to appeal the decision, as well as to contest any citations any other administrative body may cite your business with.

    They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion based on very limited information. My opinion should not be taken as legal advice. For true advice, we would require a confidential consultation where I would ask you questions and get your complete story. This is a public forum, so remember, nothing here is confidential. Nor am I your attorney. I do not know who you are and you have not hired me to provide any legal service. To do so would require us to meet and sign written retainer agreement. My responses are intended for general information only.


  2. you can challenge the decision by filing a request for trial de novo. tHE INSTRUCTIONS FOR HOW TO DO SO ARE IN THE AWARD FROM THE LABOR COMISSIONER.


  3. An appeal may simply be throwing good money after bad. Before you file an appeal, you should consult in person with an employment attorney to get a careful evaluation of the Labor Board's decision. You may discover that the Labor Board got it right, and that your time and efforts would be better spent making sure that your business is legally compliant.

    My answers to questions posted on AVVO are intended to provide general information only, and are not intended to be legal advice. Employment law issues typically require a careful case-by-case analysis. Consequently, if you feel that you need legal advice, I would encourage you to consult in person with an employment attorney in your area.


  4. The laws regarding independent contractor are very difficult, if you charge them rent and have an independent contractor written agreement it would be better. But if you tell them when to come to work, when to leave, etc. you can lose that argument. You might also want to look into worker's compensation insurance to protect yourself. As for an Appeal check into the cost first. I do not know how much she won, but it might not be worth it.

    My name is Stephen R. Cohen and have practiced since 1974. I practice in Los Angeles and Orange County, CA. These answers do not create an attorney client relationship. My answers may offend I believe in telling the truth, I use common sense as well as the law. Other state's laws may differ.. There are a lot of really good attorneys on this site, I will do limited appearances which are preparation of court documents it is , less expensive. However generally I believe an attorney is better than none, but many will offer a free consultation and a face to face meeting generally will be better, I like my clients to write a short one page history of the fact and questions they have prior to meeting with them, so nothing is forgotten.


  5. It's impossible to say whether you should appeal because you have not stated any facts that would permit an analysis as to whether the DLSE's findings were correct. If you have a legitimate basis for appeal, then you would be wise to consider that option. However, appealing blindly without regard to the strength of your case would be foolish. You risk not only your time, but also liability for the employee's attorney fees if you lose. You will also have to post a bond in the amount of the judgment before you can be heard. Consult with a local employment attorney immediately to determine your best course of action.

    This answer is a general interpretation of the law and is not fact specific to your case. Likewise it does not create an attorney-client relationship. You should seek an attorney for a review of your specific facts and documents.


  6. Don't appeal if you have no basis for appeal. In other words, unless the Labor Commissioner got it wrong, why would you appeal? They're not going to change the ruling for no reason at all. Unless you can prove that the original finding was incorrect, you will simply lose again.

    If there was a hearing, that means that, prior to that, you were given an opportunity to settle the case. Either you didn't show up, or you chose not to settle. When the case doesn't settle, one side wins and the other side loses.

    I agree with the people who have said that it would have been a better idea to get an attorney. At the very least, consult with one now to determine if there is a basis for appeal, or if you're better off just paying what the Labor Commissioner says you owe.

    I hope this information is helpful to you.

    Sincerely,
    Craig T. Byrnes

    Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with you. I am not representing you, nor doing anything to protect your legal rights. If you believe that you have suffered a legal wrong, take action before any statute or limitations expires, or your right to do so may be lost forever. Good luck in your legal matter.


  7. Without additional facts it is difficult to provide an opinion. Please note, that the appellate deadline in your type of case is very short and you will need to act very quickly if you want to preserve your right to an appeal.


  8. It's easy for small employers to make such mistakes, since they're not always experts on California employment laws. However, these laws do not differentiate between an honest mistake and a willful violation.
    Determining whether someone is an independent contractor or an employee requires an in-depth analysis of various factors; however, to oversimplify matters here, the main issue usually turns on how much control the employer had over that worker.
    I know that the Los Angeles Labor Commissioner tends to be very pro-employee, and the hearing officers are usually not attorneys or judges. It has been my experience that the LA Labor Commissioner is not very receptive of the "independent contractor" argument. I'm not sure how the hearing officers are in your jurisdiction.
    When you appeal, the case goes to the superior court, which usually has more stringent rules regarding evidence than does the Labor Commissioner's office. So, depending on the facts and evidence, you may have an argument on appeal that this worker was actually an independent contractor. However, it's hard to tell without examining the facts and applying the law to those facts.
    Also, as others pointed out, you only have 10 days to appeal a Labor Commissioner's decision, and you must post a bond with the court for the full amount of the LC's decision.
    Moreover, if, on appeal, your case goes all the way to trial and the worker wins even $1, you will be responsible for all of his/her attorney's fees. That rule doesn't apply the other way around, however.
    As to the second part of your question, I can tell you that the EDD has been pretty aggressive in cracking down on employers by conducting random audits. They are mostly interested in whether employees have been misclassified as independent contractors and, consequently, whether the appropriate taxes have been paid by the employer for each employee.
    It is highly recommended that you speak with an attorney to examine whether the workers you've classified as "independent contractors" are not actually employees. If you have misclassified your workers, you may want to change your pay practices immediately to avoid further exposure.
    It is also a good idea to consult with an attorney or HR professional to make sure your business is generally compliant with California law.
    Hope that helps!

    Additional Disclaimer: This response is for general purposes only. Nothing contained in this message should be construed as creating an attorney-client relationship or the rendering of legal advice. Unless a formal written retainer agreement has been fully executed between you and me, I will not take any action to protect your rights. Moreover, any response on Avvo.com is restricted to the limited information provided by you. You should contact an attorney for legal advice.

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