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Governor Arnold Schwarzenegger State Capitol Sacramento, CA 95814 Dear Governor Schwarzenegger: I request your VETO of SB 1583 (Corbett), which establishes joint and several liability for individuals who advise another person to treat an individual as an independent contractor, and then the independent contractor is later found to be an employee. This bill proposes to create an unjustified civil liability for “advisors” who provide advice to another person in reference to the potential employment status of an individual; namely whether it is appropriate to contract with an individual as an independent contractor versus hiring the individual as an employee. In essence, SB 1583 proposes to hold an “advisor,” along with the decision-maker, jointly and severally liable for misclassifying an individual as an independent contractor, if it is later determined that the individual was misclassified. The decision to classify an individual as an independent contractor is not an easy one. Guidelines provided by enforcement agencies such as the Employment Development Department and the Department of Industrial Relations are ambiguous and confusing and do not lead a business to reach a conclusion with which they can be confident is correct. Each agency evaluates classification subject to a case by case interpretation and each agency may reach a different conclusion. Each of these agencies has their own penalty and fee structure when they find an occurrence of misclassification. There is no clear path to definitive classification. Determining status as an independent contractor versus an employee is daunting for many businesses because the process is so ambiguous and complex, providing no certainty for decision-making. SB 1583 is the wrong approach - instead of imposing new penalties and liabilities, the process should be revised with ways to improve the ability of business to make and be confident that they have made sound business decisions.

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