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Employee vs Contractor status California

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  • Employee vs Contractor status California

    Good Day Everybody. Up front I just want to let you know that I do understand the EE vs Contractor, Common Law test, reasonable basis, etc. But I just wanted to run this by some of you.

    My nephew is being offered a job with a company that assists other companies with choosing how they want to hire. During the interview he was told this is how he would be paid for the first 3 months "your rate would be $11/hour - time and materials - 1099 - you would be an independent contractor. No overtime, no benefits, no insurance, you conver ALL the taxes - just simple T and M." If he makes the 90 days then he would go on the regular payroll.

    I have never heard of this. I can't imagine it's kosher. I don't see how red flags are not raised when these ee's file a 1099 AND a W2 at the end of the tax year.

    Just would like some thoughts. Thanks!

  • #2
    Very likely not legal. However at the risk of stating the obvious, there are specific legal rules on worker classification, somewhat different in CA then elsewhere. We would normally have to run through CA worker classification rules and see how the law actually classifies the emloyee (which your question does not do).

    I think that it is very likely that the test will come up "employee". Worse, IRS (who also gets to look at this) is publically very skeptical that a worker can be both an independant contractor and employee for the same employer. And filing a 1099 and W2 is an audit flag. So likely the employer is not only wrong, but they are also not very bright, waving an audit flag at IRS. Plus some workers will fail the 90 day period, file for UI (no matter what the paper they signed said), and that will force a state audit.

    I generally would argue that this is on it's face a "bad employer" and smart employees should simply avoid working for bad employers. That advise still might be correct. HOWEVER, this is a bad economy, and we are talking about becoming an employee in 90 days (assuming that this is not just more B.S.). It MIGHT be worth while for a worker who cannot otherwise find a job to jump through this hoop. File for UI if things fall apart. File a wage claim for unpaid MW/OT, plus any unreimbursed business expenses. The worker should keep good records of everything that happens should they go this route.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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