The long-anticipated case Dynamex Operations West, Inc. v. Superior Court of Los Angeles, was issued on April 30, 2018. The case dealt with whether delivery drivers classified as independent contractors were misclassified as such under California Industrial Wage Commission Wage Order No. 9-2001.
Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
Effective January 1, 2017, employers with 10 or more employees are required to electronically file and pay their EDD employment tax returns, wage reports, and payroll tax deposits. All other employers will be subject to this requirement effective at the start of 2018.
Although it is common practice for corporate officers to take shareholder loans from company coffers, weak or inconsistent recordkeeping can turn this into a serious problem during California payroll tax audits - undocumented loans are often picked up by state tax agencies as unreported "wages." In order to avoid scrutiny, or a possible tax assessment for failure to report wages, businesses must make sure that their shareholder loans are defensible as bona fide loans, and not advances on payments for services rendered, i.e. wages.
Employers who wish to utilize independent contractors in their business model may often do so, however, adequate review of the employers' documents and practices is crucial to a successful business plan based on an independent contractor workforce. This week, Uber learned this lesson the hard way.
California's Employment Development Department publishes a new Employer's Guide (DE 44) and Household Employer's Guide (DE 8829) each year to help you understand your rights and responsibilities if your business hires employees.
The Law Office of Williams & Associates, PC has been informed that the California Employment Development Department has recently won at least two administrative decisions against Uber in appeals of Obstructed Claims for Unemployment Insurance Benefits, before the California Unemployment Insurance Appeals Board. In plain English, this means that the state of California determined that Uber drivers are misclassified as independent contractors, that Uber should have paid state employment taxes and withholding on the payments rendered to those drivers.
When I left the California EDD's Legal Office over two years ago, I predicted that the "rideshare" software application companies, Uber and Lyft, would soon come under scrutiny for worker classification issues. My prediction was correct. For the past few months, developments have occurred in two federal wage and hour lawsuits involving these two companies, and centering on issues of worker classification.
The number of workers identifying themselves "independent contractors" is growing in the United States. In 2005 the U.S. Bureau of Labor Statistics determined that the number of independent contractors rose from 6.4% of the workforce in 2001 to 7.4% of the workforce by 2005. In 2010, Navigant Economics claimed the following:
The Intersection of Employment Tax and Employment Law