In Heritage Residential Care, Inc. v. Division of Labor Standards Enforcement, a California Court of Appeal ruled that an employer who failed to provide itemized wage statements to workers the employer had mischaracterized as independent contractors due to a mistaken belief of law is still liable for the civil penalty associated with that failure.

Heritage Residential Care, Inc. misclassified 16 employees as independent contracts. When the DLSE came to perform a workplace inspection, it determined the employer was in error and issued a citation for violating the Labor Code as well as a civil penalty. Labor Code 226.3 requires the Labor Commission to take into consideration whether the violation was inadvertent. The Court defined "inadvertent" as unintentional, accidental or not deliberate. Because the employer had intentionally decided not to provide itemized wage statements, its actions were not "inadvertent" under the statute even though they were based on a misunderstanding of the applicable law. As always, employers should exercise care when classifying employees; deliberate decisions, even those based on mistakes regarding the law, can still lead to civil penalties and liability.