I have some questions pertaining to a California EDD Employment Audit. The auditors appear to take the position that any person paid 1099 who cannot be proven to be running a substantial real business is an employee. So the auditors will look for something like a web site run by the contractor, and if they don't find one, they tell you the person is defacto an employee.
Let's confine this discussion to people who do less than $2K of work per year (i.e., extremely de minimus work). To me calling such a person an employee by default is ridiculous. If a person works as a gardener or landscaper, they do not necessarily have a web site. Such a person might make only $50K of gross sales a year and be charging an individual client $2K/year. It's easy to believe such a small business does not have a website. The worker might be uneducated and unskilled in the use of computers. And it's really difficult to understand how such a person working $2K per year for another business is an "employee" of that business. This leads to the questions:
1) Is there any California law, or tax law cases decided in court, that will provide an exemption for cases where the worker did less than X hours, or Y gross dollars, of work per year? Having a solid number to work around as an exemption would really help when the auditor starts to nickel and dime. If there are other automatic exemptions, I would like to identify those.
2) Does the old "20 Question test" for contractors versus employees apply in California, or does California use a different test criteria for establishing if the person is an employee? It feels like a ridiculous waste of time running through the 20 question test for a gardener, answering questions like "did you supervise or direct his work?" But if this is required I just need to know that. It would be best to hope to find automatic exemptions, so time spent in the audit will be on cases that actually make a material difference.