A contractor discovers that a subcontractor has been misclassifying employees as independent contractors in violation of AB 5. What is the contractor's potential liability?
Correct Answer
B) Joint and several liability for unpaid wages and penalties
Under California law, contractors can be held jointly and severally liable with subcontractors for wage and hour violations, including those resulting from misclassification of workers.
Why This Is the Correct Answer
Under California Labor Code Section 2810.3 and related AB5 provisions, general contractors and direct contractors can be held jointly and severally liable with their subcontractors for unpaid wages, fringe benefits, and payroll tax penalties owed to workers misclassified by the subcontractor. This means the contractor is fully liable alongside the subcontractor — not just secondarily.
Why the Other Options Are Wrong
Option A: Liability only for workers' compensation premiums
Limiting liability solely to workers' compensation premiums is incorrect. While workers' comp is one consequence of misclassification, California law extends the general contractor's exposure to all unpaid wages, benefits, and penalties — far broader than just insurance premiums.
Option C: No liability - only the subcontractor is responsible
California's joint liability framework was specifically enacted to prevent contractors from shielding themselves behind subcontractors. The 'no liability' defense is unavailable — contractors have an affirmative duty to monitor subcontractor compliance and may be fully liable for subcontractor violations.
Option D: Limited liability up to $10,000
There is no $10,000 liability cap under California law for these violations. Joint and several liability means the contractor could be responsible for the full amount of unpaid wages and penalties for every affected worker, which can far exceed $10,000.
Memory Technique
Think of 'joint and several' as a joint bank account for liability — either party (contractor or subcontractor) can be forced to pay the full amount. The word 'joint' means together; 'several' means each separately. Either one is fully on the hook.
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