AB 1160

Under current law, any employer who willfully provides false information to the Department of Revenue or who willfully and with intent to evade any requirement of the state income tax law misclassifies or attempts to misclassify an individual who is an employee of the employer as a nonemployee is subject to a $25,000 penalty for each such violation. For purposes of imposing the penalty, “employer” means a person engaged in the construction of roads, bridges, highways, sewers, water mains, utilities, public buildings, factories, housing, or similar construction projects or a person engaged in the painting or drywall finishing of buildings or other structures.

This bill provides that if an employer misclassifies an individual who is an employee of the employer as a nonemployee, the employer may be subject to a penalty of $500 for each such violation, if DOR shows that the employer’s action or inaction was due to the employer’s willful neglect and not to reasonable cause. Under the bill, if DOR finds that an employer has had three or more cases of negligent misclassification of employees as nonemployees in a five-year period, the third negligent misclassification and any subsequent findings of negligent misclassification are treated as intentional misclassifications unless the employer proves by a preponderance of the evidence that the employer did not intentionally misclassify employees as nonemployees.

Under the bill, if an employer intentionally provides false information to DOR or with the intent to evade any requirement of the state income tax law misclassifies or attempts to misclassify an individual who is an employee of the employer as a nonemployee, the employer may be subject to a penalty of $25,000 for each such violation.

For purposes of imposing the penalties under the bill, the term “employer” is not limited to only construction contractors and persons engaged in the painting or drywall finishing of buildings or other structures, but applies to all employers.

Under the bill, DOR may disclose on its website a list of persons who, after all appeal rights have expired, have been subject to a penalty for providing false information to DOR or who have intentionally misclassified or attempted to misclassify employees as nonemployees during any seven-year period. The disclosure is limited to the name and address of each person and the date that each penalty was imposed on the person during the seven-year period.