Employee or 1099 California Independent Contractor?

AB 5

• • What’s on this page?
    • Uber/Lyft Drivers Covered CA 82% of Bronze Premium Subsidy? 
    • Dynamex Ruling
    • EDD CA Employer’s Guide DE 44
    • Steves’ CPA’s Summary
    • Common Law Rules
    • Instant Quotes

AB 5 Video  How will it impact independent contractors in California?
10.7.2019

• Proposition 22 ruled unconstitutional – LA Times
• Freelancers fear California’s new gig worker law will wipe them out Los Angeles Times 10.25.2019
• Your Taxes in the Sharing Economy IRS.Gov 2.17.2017 VIDEO

IRS Website on 1099 vs Employee

• In CA Dynamex and AB 5 Control!
• California Industrial Relations – Contractor vs Employee
  • IRS Publication 1779  Independent Contractor or Employee Rev 3.2022
  • Tax Topic 762 Independent Contractor vs Employee
• Trump Rule withdrawn – Broader analysis allowed
  • Our Webpage on Schedule C – Self Employment – Profit or Loss from Business
  • Judge Reinstates Trump Independent Contractor Rule Withdrawn by Biden Insurance Journal 3.23.2022
  • Los Angeles Times Employee or Contractor 2.23.2019
• Vote nearing Los Angeles Times
• New California labor law AB 5 is already changing how businesses treat workers Los Angeles Times 2.14.2020
• 1099 Misc Form
• Turbo Tax – What is a 1099 and who gets one
  • 1099 Cafe FreeLancer vs Self Employed   
  • irs.gov/1099-misc-independent-contractors-and-self-employed   

California Resources

• CA EDD DE #38  13 Questions for Determination Revised January 2016 – out of date?
• EDD Guide DE 44 see Page 8
• Worker’s Compensation Rules – CA Department of Industrial Relations Common Misconceptions
• EDD Pamphlet  DE 573 m Pre Dynamex Case out of date?
• Labor Code 3353
• IRS Website  —   Independent Contractor – Self Employed – Employee  
• SS8 Form – Determine Worker’s Status for Federal Employement taxes & Income tax withholding
• Publication 15 A Employer’s supplemental Tax Guide
• IRS SS-8 Worksheet to determine status
• My CPA’s warnings about what happens if you don’t file the 1099 properly
• Willful misclassification SB 459 1/1/2012
• Nolo Contract With Independent Contractor How to Safely & Legally Hire Independent Contractors
• IRS 20 factors 
• DON’T BLAME truck drivers in the cargo backups at ports; blame shipping companies that misclassify drivers as independent contractors LA Times 2.16.2022

Uber & Lyft

What is a #bona fide employer – employee relationship?

• Health Care Reform requires that one have a bona fide employer – employee relationship at common law, not husband & wife.  Even if you had a group plan prior to ACA.
  • See our page on 1099 Independent Contractors vs Employees & Owners

What is that?  Why?

Legal Reasoning

I’ll grant, that I have trouble completely following the logic given to me by Covered CA, but I have to acknowledge that every Insurance Company agrees.

 Dear Steve,

• only a small employer new definition of Small Employer   §10753  (q) (1)   may participate in the SHOP Small Employer Program Covered CA. 45 CFR 155.710:
• “Small employer” and “employer” are defined with reference to Section 2791 [300gg-91] of the Public Health Service Act.
• Employer has the meaning given to the term in section 2791 of the PHS Act, except that such term includes employers with one or more employees. All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Code are treated as one employer.  CFR § 155.20.
• (a) (6) EMPLOYER .—The term ‘‘employer’’ has the meaning  given such term under section 3(5) of the  Employee Retirement Income Security Act of 1974, except that such term shall include only employers of two or more employees. ^{Page 1533 Public Health Service Act}
  • (d) other definitions
     
    (5) Employee The term “employee” has the meaning given such term under section 3(6) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1002 (6)].
    (6) Employer The term “employer” has the meaning given such term under section 3(5) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1002 (5)], except that such term shall include only employers of two or more employees.  300gg-91.
  • Under Section 2791, “employer” is defined by reference to ERISA Section 3(5).  [29 US Code §1002 Definitions]
  • (5) The term ‘‘employer’’ means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.
  • (6) The term ‘‘employee’’ means any individual employed by an employer.  Page 9 ERISA.
  • ERISA Section 3(5) requires that an employer employ at least one common law employee (i.e. someone other than the owner).
  • IRS  Common Law Employee
    • Worker Classification 20 Factors
  • Ascende Human Capital Consulting
    • Our Website on Employee vs 1099 Independent Contractor
• Under 29 C.F.R. 2510.3-3(c), a regulation adopted under ERISA, an employee does not include a sole proprietor or the sole proprietor’s spouse, or a partner in a partnership or the partner’s spouse. See also 77 Fed. Reg. 18399 (Mar. 27, 2012).    ^{(legal reasoning courtesy of Covered CA Facebook inquiry)     SHOP Agent Guidelines}

 How many common law employees must be enrolled for coverage to be considered group coverage?

• A. For a group health plan to be considered a “group health plan” under the Employee Retirement Income Security Act (ERISA), there must be at least one common law employee enrolled.
• Pursuant to 29 C.F.R. 2510.2-3(b), an “employee benefit plan” does not exist if no “employees” are covered by the plan. Pursuant to 29 C.F.R. 2510.3-1 and 29 C.F.R. 2590.732(d) an “employee” does not include the sole owner of a business or a spouse of the business owner. New York.gov

See our other pages on Employer – Employee Definition

• EmployER Definition – Health Care Reform
  • 1099 vs Employee & Other Defintions
  • EmployEE Definition
    • COBRA & California Cal-COBRA 36 months total coverage
    • Dependent Definition – Up to Age 26 – Add newborn baby
      • Registered Domestic Partners – Spousal Health Coverage?
• Participation & Premium Contribution Requirements
  • Documents to show bonafide Employer in business
  • Management Carve Outs – §2716 – Similarly Situated
    • Common Ownership – Affiliated Companies – Corporations

****

• Healthcare.gov  
• If you’re self-employed with no employees, you’re not considered an employer. You can use Covered CA  or Direct with Insurance Company to find coverage that fits your needs.
• sole proprietors and owners of S Corp   – (Does not pay Federal Income Tax) can be small groups as long as the one employee is not the sole proprietor or their spouse ^{blueshieldca.com}
• • 3. Additional attestation for establishing minimum group size:
    a. If my eligibility is required to meet the minimum group size to qualify for small group business coverage, I additionally attest that:
     
    I do not wholly own the above-named company with my spouse or on my own  ^{BC eligibility statement}
• C Corp  separate legal entity owned by shareholders
• S Corp   – Does not pay Federal Income Tax
• Blue Shield Flyer Small businesses and the ACA Rev 3.2013 Michael Lujan was very explicit in 2 presentations to CAHU and LAAHU, an EE is someone who is listed on a DE 9C.  Sole Proprietors and partners are normally not on a DE9C.  The sole prop and partner can be included in a group plan IF they have at least one W2 EE listed on the DE9C.

Resources & Links

• §31.3401(c)-1   Employee.
  • (b) Generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.
  • That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so.
  • The right to discharge is also an important factor indicating that the person possessing that right is an employer.
  • Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work to the individual who performs the services.
  • In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is not an employee.
• See our webpage on Employee vs 1099 Contractor  

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