PART 3 OF 4: The Consequences of Getting It Wrong

The exposure that follows a misclassification finding.

Misclassification liability is cumulative, retroactive, and can arise from multiple agencies at once. A single worker's claim frequently expands into an examination of every similarly situated provider in the practice. This article outlines the exposure a California healthcare practice faces when classification is wrong.

Wage and hour liability

An individual reclassified as an employee may be owed amounts never paid during the relationship:

• Unpaid overtime and minimum wage.

• Meal and rest period premiums.

• Reimbursement of business expenses the worker bore personally.

• Waiting time penalties and wage statement penalties.

• Interest and, in many cases, the prevailing worker's attorney's fees.

Tax and payroll exposure

Misclassification affects tax obligations at both the state and federal level, including unpaid payroll taxes, unemployment and disability contributions, and associated penalties and interest. The Employment Development Department may assess liability following an audit, and federal exposure can follow separately.

Benefits, insurance, and coverage gaps

A reclassified worker may claim entitlement to benefits made available to employees, and the practice may face gaps in workers' compensation coverage. Workers' compensation exposure is particularly significant, as failing to carry coverage for someone later deemed an employee carries its own penalties.

Statutory penalties and enforcement

California law provides civil penalties for willful misclassification, and claims may be pursued individually, as class actions, or through representative actions. Enforcement can originate from a worker complaint, an agency audit, or an unemployment or workers' compensation claim filed after the relationship ends.

How exposure typically surfaces

Most practices do not discover a classification problem through proactive review. It surfaces when a departing provider files a claim, when an audit begins, or when an injury prompts a workers' compensation question. By that point, the liability has usually been accruing for years!

How West Coast Health Law Can Help

We help practices assess misclassification exposure, respond to agency audits and worker claims, and correct classification issues before they generate cumulative liability.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every practice is different; consult a qualified attorney about your specific circumstances.