California Senate Majority Leader Ellen M. Corbett (D-10) has sponsored S.B. 459, which would burden all businesses that legitimately use the services of independent contractors, including respondents receiving incentives for participation in survey, opinion and marketing research.

S.B. 459 passed the Senate on June 2 and is winding through the committee process in the Assembly.

In an effort to address the occasional misclassification of service providers as independent contractors, S.B. 459 puts at risk even legitimate uses and classification of independent contractors by:

  1. Requiring additional paperwork and notice requirements for individuals who already understand and appreciate their independent status;
  2. Confusing those individuals with information that is already clear in written independent contractor agreements and related documentation;
  3. Burdening businesses and individuals alike with related paperwork and recordkeeping requirements;
  4. Creating a standard of “willful misclassification” that is vague and ambiguous under California law. In fact, the website of the California Department of Industrial Relations, regarding the determination of independent contractor status, states: "There is no set definition of the term "independent contractor" for all purposes, and the issue of whether a worker is an employee or independent contractor depends upon the particular area of law to be applied. For example, in a wage claim where employment status is an issue, DLSE will often use the five-prong economic realities test to decide the issue. However, in a separate matter before a different state agency with the same parties and same facts, and employment status again being an issue, that agency may be required to use a different test, for example, the "control test," which may result in a different determination.  Thus, it is possible that the same individual will be considered an employee for purposes of one law and an independent contractor under another." (emphasis added); and
  5. Imposing misdemeanor charges and civil penalties up to $25,000 for classification, paperwork and/or recordkeeping requirement violations, discouraging anyone wishing to legitimately use independent contractors,  and thus reducing the opportunities for those contractors.

MRA fears that S.B. 459 poses an untimely threat to research, and to the California economy. The legitimate use of and classification of service providers as independent contractors is critical to the success of many businesses and contributes to economic growth and vitality in California and across the nation. For example, see a recent study from the Coalition to Protect Independent Contractor Status, titled “The Role of Independent Contractors in the U.S. Economy.”

This is not the first time such legislation has advanced in California. Senator Padilla's S.B. 622, vetoed by then-Governor Arnold Schwarzenegger (R) in October 2007, had similar provisions with penalties related to the misclassification of employees as independent contractors. He also vetoed Senator Corbett's S.B. 1583 in September 2008, which contained similar provisions relating to a person knowingly advising an employer to treat an individual as an independent contractor.

MRA has expressed our opposition to S.B. 459 with California legislators and the Senate Majority Leader.