Prevailing Wage Law, Worker Classification, and Reimbursement: Lessons From Anton’s Services and Changes Under SB 809

By Tracie E. Stender and Trevor S. Locko

From worker classification to expense reimbursement, California employers must navigate a complex regulatory landscape to avoid the pitfalls of noncompliance and their costly consequences. This challenge particularly impacts employers with public works contracts, who must also juggle compliance with the Prevailing Wage Law.

This article summarizes practical tips to consider for addressing misclassification issues under the Prevailing Wage Law based on a recent Court of Appeal opinion, Anton’s Services Inc. v. Hagen, 116 Cal.App.5th 90 (2025), and explains how the recent enactment of SB 809 impacts employee classification and business expense reimbursement, especially for employers in the construction trucking industry.

The Prevailing Wage Law’s Impact on California Employers

The Prevailing Wage Law (Labor Code sections 1720 to 1861) generally requires workers employed under a public works contract to receive the prevailing wage. The Director of Industrial Relations (DIR) establishes the applicable prevailing wage based on location and worker classification, which the DIR defines by the scope of work performed.¹
 
For employers with public works projects, compliance with the Prevailing Wage Law requires careful payroll and timecard analysis. Employers must identify the actual work performed by their workers on a public works project, match that work to the appropriate prevailing wage classification, pay the corresponding prevailing wage rate, and satisfy related public works obligations.

Anton’s Services – Pay Attention to the Work Performed

Anton’s Services, Inc. v. Hagen, 116 Cal.App.5th 90 (2025) instructs employers on the steps they should take (and avoid) when their worker classifications are challenged under the Prevailing Wage Law.
 
In Anton’s Services, the Division of Labor Standards Enforcement (DLSE) cited Anton’s Services, Inc. (Anton) for misclassifying workers. Anton was a subcontractor on the Torrey Pines Road Project and Voltaire Street Overpass Project, two public works contracts in San Diego. For the Torrey Pines Road Project, Anton was subcontracted to perform work as the “Clearing/Demolition Constructor.” On the Voltaire Street Overpass Project, Anton’s scope of work included the “removal of bridge sidewalk, railing, and edge concrete.” Despite this broad scope of work, Anton classified its workers under the DIR’s “Tree Maintenance” classification, arguing that its workers performed some tree removal on both projects.
 
The DLSE disagreed. Because the work performed for both projects was incidental to construction, the DLSE found that Anton should have classified its workers under the “Laborer (Engineering Construction)” classification. As a result, the DLSE determined that Anton underpaid its workers and imposed on Anton steep assessments, penalties, and liquidated damages. After the DIR affirmed, Anton filed a petition for writ of administrative mandamus in San Diego Superior Court, which was denied.
 
Anton’s appeal fared no better. The Court of Appeal affirmed, holding that the administrative record and applicable law supported the DLSE’s finding that Anton misclassified and underpaid its workers.² The Court of Appeal also rejected Anton’s good-faith defense to the penalties imposed given Anton’s failure to promptly and voluntarily fix the misclassification issues, and affirmed liquidated damages against Anton because it failed to deposit the full assessment amount with the DIR.

Lessons Learned From Anton’s Services

Anton’s Services is a cautionary tale to California employers with public works contracts. Fortunately, the Court of Appeal’s opinion offers two important (and cost-saving) lessons for employers facing regulatory enforcement over their prevailing wage classifications.

Promptly Correct Mistakes

Mistakes happen. The good news is that Labor Code section 1775 rewards employers who promptly address their errors. Under Labor Code section 1775, employers may reduce penalties by demonstrating that the misclassification was a good-faith mistake that was promptly and voluntarily corrected. Anton’s refusal to do so, coupled with its prior record of prevailing wage violations, resulted in the Court of Appeal affirming the DLSE penalties in full. Employers facing similar circumstances should take heed of Anton’s costly error.

Deposit the Assessment into Escrow

No one wants to open the mail to find a civil wage and penalty assessment. But employers who receive such an assessment should deposit the full assessment amount (yes, even penalties) into escrow with the DIR within 60 days. While this recommendation may seem unattractive, employers who make this deposit should avoid incurring liquidated damages under Labor Code section 1742.1. Anton refused to do so because the contractor for the two projects deposited the wages owed to Anton’s workers directly with the City of San Diego. The Court of Appeal declined to credit Anton for any of these deposits and ordered Anton to pay the liquidated damages in full. Don’t be like Anton!

SB 809 – Vehicle Ownership and Related Reimbursements Clarified

Through SB 809, the California Legislature added three new Labor Code sections: section 2750.9 (Construction Trucking Amnesty Program), section 2775.5 (Vehicle Ownership), and section 2802.2 (Vehicle Reimbursement). These new Labor Code sections have been in effect since January 1, 2026, and employers, particularly those in the construction trucking industry, should understand their impact on wage and hour compliance.

For employers in the construction trucking industry, Labor Code section 2750.9 offers a new amnesty program to resolve claims arising from misclassifying workers as independent contractors. Under the amnesty program, employers can avoid civil and statutory penalties by entering into settlement agreements with the Labor Commissioner by January 1, 2029 to resolve misclassification claims.

Labor Code section 2775.5 clarifies that mere vehicle ownership – whether personal or commercial vehicles – does not dictate a worker’s classification as an employee or independent contractor. In doing so, the California Legislature reiterated that the ABC Test remains the benchmark for determining a worker’s status as an employee or independent contractor. For context, the ABC Test assumes that a worker is an employee. An employer can overcome this assumption and justify a worker’s status as an independent contractor if the worker meets the following requirements:

(A) the person is free from the control and direction of the hiring entity in connection with the performance of the work, (B) the person performs work that is outside the usual course of the hiring entity’s business, and (C) the person is customarily engaged in an independently established trade, occupation, or business. See Cal. Lab. Code section 2775; Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018).

Labor Code sections 2775.5 and 2802.2 also reinforce an employer’s obligation to reimburse employees for their business-related vehicle use. Section 2802.2 has specific requirements for employees in construction trucking, who are entitled to reimbursement for the use, upkeep, and depreciation of their vehicles, including commercial trucks, tractors, and trailers. Employees and employers must negotiate the specific reimbursement amount, which must either be a flat rate reimbursement or per-mile reimbursement. At a minimum, employees in construction trucking must receive a flat rate amount equal to the actual amount expended, or, if using a per-mile reimbursement, at least the IRS’s standard mileage reimbursement rate.

Employer Takeaways – Check Your Classifications

Employers with public works contracts should pay close attention to their workers’ classifications under the Prevailing Wage Law. As demonstrated by Anton’s Services, employers must verify that their workers are actually performing work that is consistent with their prevailing wage classification and being paid at the appropriate hourly rate. If mistakes are uncovered, employers should be proactive, acting promptly to avoid incurring further penalties.

Employers should review and verify their traditional classifications (independent contractor versus employee) for workers who use their own vehicles to perform their jobs. If a worker’s current classification rests, in part, on vehicle ownership, employers should take a closer look at that worker’s classification to ensure that the ABC Test is met.

Employers in the construction trucking industry may find that their independent contractors should now be classified as employees given the implementation of Labor Code section 2775.5. If that is the case, employers should ensure that reimbursement policies are in place to comply with the reimbursement requirements under Labor Code section 2802.2. Generally, employers should pay their employees a flat rate equal to out-of-pocket expenses or at least the IRS’s standard mileage reimbursement rate.

Employers should consider discussing these takeaways with qualified employment counsel to ensure compliance with the Prevailing Wage Law, SB 809, and other California wage and hour requirements.