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Using licensed labor? Beware hidden workers’ comp, wage-and-hour liability trap

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in Compensation and Benefits,Human Resources,Leaders & Managers,Management Training

The general rule in California is that when an employer engages an unlicensed person to perform work that requires a license, that person is considered an employee, not an independent contractor. That's not the case if the person is properly licensed.

Essentially, the law puts the burden on those who want work performed to check to make sure the person doing the work has the appropriate license. Otherwise, the employer may be liable for any on-the-job injuries that occur.

For example, the unlicensed person could sue the employer for failing to supply workers' compensation coverage and for back pay and overtime—just as if he had been a regular employee.

Recent case: Kyong Chin, who worked as a painting contractor, originally held a California painting contractor license. When he first signed a contract to perform painting services for a shopping center, he told the owners he held a license, which he provided to shopping center management.

Later, his license expired, but he still bid on painting contracts with the same shopping center owners. Then he fell from a ladder and sued, alleging that he was really an employee. He based his suit on the California labor law that states that an unlicensed contractor is presumed to be an employee and not an independent contractor.

The court disagreed in this case. It said that if the owners had never asked to see the license, Chin would have been an employee. On the other hand, if Chin had lied about the license, he'd be an independent contractor.

But since the owners first had asked for and received proof that he had the appropriate license, the case turned on whether it was reasonable for them to assume Chin would remain licensed. The court said that was the case here. The owners couldn't be expected to ask for weekly or monthly licensing updates. (Chin v. Namwar, et al., No. B198986, California Court of Appeal, Second Appellate District, 2008)

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