A contractor discovers an employee was misclassified as an independent contractor for 6 months, earning $60,000. What is the potential EDD penalty exposure for willful misclassification under California law?
Correct Answer
C) $5,000 to $15,000
California Labor Code Section 226.8 provides for penalties of $5,000 to $15,000 per violation for willful misclassification, plus other damages and back taxes.
Why This Is the Correct Answer
California Labor Code Section 226.8 specifically establishes a penalty range of $5,000 to $15,000 per violation for willful misclassification of employees as independent contractors. This is the statute directly applicable to the scenario described.
Why the Other Options Are Wrong
Option A: $10,000 to $25,000
$10,000 to $25,000 is incorrect. While $10,000 falls within the correct range, $25,000 exceeds the per-violation cap under Labor Code Section 226.8 for standard willful misclassification. This range does not match the statutory penalty structure.
Option B: $15,000 to $30,000
$15,000 to $30,000 is incorrect. $15,000 is the upper bound of the correct range, not the lower bound. $30,000 far exceeds the per-violation penalty cap established by Labor Code Section 226.8.
Option D: $20,000 to $50,000
$20,000 to $50,000 is incorrect. These figures are significantly higher than what Labor Code Section 226.8 prescribes. There is no statutory basis for a $20,000–$50,000 per-violation penalty for willful misclassification under this section.
Memory Technique
Think '5 to 15 to stay alive' — $5,000 to $15,000 is the penalty range under Labor Code Section 226.8 for willful misclassification. The '226.8' section number itself has an 8, reminding you it's an 8-figure dollar range at the low end ($5,000 starts with the same digit count as '8').
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