Are you a San Diego employer who utilizes 1099 workers as part of your business operations? If so, you should give serious consideration to your planning for 2020 to avoid 1099 worker misclassification audits, penalties, and other financial consequences.
There has been a lot of conversation in the past year regarding the Dynamex decision and it’s impact upon 1099 workers in California. The California Employment Development Department or EDD audits every California business on a 3 year cycle. It isn’t a question of whether or not you will be audited. The first question the EDD auditor will ask is “Do you have any 1099 workers?” What will follow could result in fines and penalties of tens or hundreds of thousands of dollars per employee going back years.
California is desperately attempting to raise taxes, and 1099 worker misclassification is the primary target for 2020. Recently, the Supreme Court of the United States (SCOTUS) and the Supreme Court of California changed the nature of independent contractors and the relationship between 1099 workers and the company who uses them. It used to be primarily an issue of control. Today, the primary driver is the financial relationship between the parties. The SCOTUS ruling has established a benchmark followed by the US Department of Labor or DOL, the IRS and California’s state agencies including the EDD.
If the 1099 worker obtains more than 60% of their earnings from your company you risk a 1099 worker misclassification ruling entitling your “employee” to recover years of back wages, unpaid overtime, compensation for missed benefits including healthcare provision and retirement account matching, and compensation for other employee benefits. In addition, you will face a civil penalty of $25,000 per incidence, as well as years of back payroll taxes, unemployment and workers compensation premiums as well as FICA and other financial consequences.
The business and employer defense attorneys at the Watkins Firm help our clients to review existing 1099 relationships in context of new labor laws. We help employers to avoid catastrophic financial consequences that have forced the closure of many other businesses and work to bring our clients into compliance with local, state and federal employment laws.
We invite you to contact us or call today for a free consultation at 858-535-1511.