Introduction

A recent enforcement action by the California Labor Commissioner’s Office Labor Commissioner underscores the significant financial and legal risks employers face when misclassifying employees as independent contractors. On October 1, 2025, Labor Commissioner issued citations totaling $4,423,450 against Hart Placement Agency Inc., a Canoga Park-based staffing company, along with its principals. The citations stem from finding that the company willfully misclassified 144 caregivers who provided services in private homes throughout Los Angeles County.

Factual Overview

An investigation conducted by Labor Commissioner’s Bureau of Field Enforcement (“BOFE”) revealed a systemic practice of classifying caregivers as 1099-eligible independent contractors while simultaneously exercising significant control over their work. Of the total citation amount, $4,266,450 is owed directly to affected workers. The investigation, covering October 2022 through December 2024, identified several key practices:

The company had control over caregiver schedules, duties and compensation
Caregivers were required to register businesses to appear like independent contractors
Workers were not provided with paystubs or paid sick leave as required under California law
Caregivers were instructed to falsify timesheets to hide shifts exceeding 12 or 24 hours
Workers signed agreements they were not given copies of

Worker Classification in California

This citation highlights the continued importance of California’s “ABC Test,” which governs whether certain types of workers may be properly classified as an independent contractor.¹ Under this standard, a worker is presumed to be an employee unless the employer can establish all three of the following:

A. The worker is free from the control and direction of the hiring entity

B. The work performed is outside the usual course of the hiring entity’s business

C. The worker is engaged in an independently established trade or business

Here, Hart Placement Agency had complete control over the workers’ schedules, duties and compensation, which strongly supports the finding that the caregivers were employees, despite being labeled as contractors. For caregiver agencies, item B of the ABC Test is often the biggest issue. A caregiving agency must be able to demonstrate that the work is not within the usual court of business to classify a worker as an independent contractor.

It is also important to note that the ABC Test does not apply to all types of workers. A small subset of workers, such as those in licensed professions like physicians and lawyers, are subject to the older, much more relaxed Borello test,² which focuses more on whether the hiring entity has the right to control the manner and means of the worker’s work. Employers should carefully assess and identify the applicable test for their workers and industry.

Additional Violations and Enforcement Trends

Beyond misclassification, Labor Commissioner found multiple independent labor law violations, including:

Failure to provide accurate wage statements
Failure to provide paid and sick leave and required notices
Willful misclassification of workers

Labor Commissioner initiated the investigation following a referral from the Pilipino Workers Center of Southern California, demonstrating the growing role of community organizations in identifying and reporting labor violations. This enforcement action reflects a broader trend—between January 2022 and April 2026, BOFE issued over 2,400 citations and recovered more than $58.3 million in wages, damages, and penalties for workers.³ Misclassification remains a priority enforcement area, particularly in low-wage industries such as caregiving, as many violating employers tend to use misclassification of independent contractors in an attempt to avoid certain wage-and-hour statutory requirements.

Impact on Employers

This case serves as a clear warning to employers, especially staffing agencies and companies operating in caregiving or other labor-intensive industries. Employers should take the following steps to mitigate risk:

Audit worker classifications by regularly evaluating whether independent contractors meet the ABC Test or other applicable classification standard.
Review operational control by assessing whether the company exercises control over schedules, duties, or compensation
Ensure wage statement compliance by confirming that paystubs meet California’s statutory requirements
Implement accurate timekeeping practices by avoiding any practices that could be construed as falsifying or obscuring hours worked
Evaluate workers’ compensation coverage by ensuring all properly classified employees are covered

Employers should be aware that citations issued by Labor Commissioner may be appealed within 15 business days. In this case, the defendants have appealed and a hearing is currently pending.

Conclusion

The Hart Placement Agency matter illustrates that misclassification is not merely a technical violation but rather a high-risk compliance failure that can trigger substantial penalties and broader legal exposure. Employers who rely on independent contractor models should proactively review their practices to ensure compliance with evolving legal standards.

The experienced attorneys at Palmer Kazanjian Wohl Hodson regularly advise caregiver and home care agencies, as well as all manners of other employers, on worker classification, wage and hour compliance and risk mitigation strategies. We are available to offer guidance to clients who want to improve their worker classification process and help restructure practices to align with California law.

¹ Assemb. B. 5, 2019–2020 Leg., Reg. Sess. (Cal. 2019); Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal. 5th 903.

² S.G. Borello & Sons, Inc. v. State Dept. of Indus. Relations (1989) 48 Cal.3d 341.

³ California Dept. of Industrial Relations, https://www.dir.ca.gov/DIRNews/2026/2026-34.html