W-2 or 1099-NEC – Who Makes The Decision?
This discussion is primarily aimed at California preparers but may also apply to those in other states that have adopted the ABC test or other hardline stances when determining whether a worker is an independent contractor or employee.
When the CA Supreme Court adopted the ABC test there was a flurry of education providers offering courses on how to provide guidance to employers on who is or isn’t an employee or independent contractor, which is actually legal advice that should be given by a labor attorney.
California labor law includes some severe penalties for misclassifying a worker. These penalties apply not only to the employer but also to paid advisors other than labor attorneys.
If you are a CA preparer providing advice other than to treat a worker as an employee, you should be aware that you are at risk for some nasty penalties over this issue. The following is an excerpt from California Labor Code Sec 2752:
Paid Advisors Also Subject to Penalty - Under this law, paid advisors (excluding attorneys and employees of the company) who "knowingly advise" employers to treat an individual as an independent contractor to avoid employee status for that individual are jointly and severally liable for any penalties imposed on the employer if the individual is found not to be an independent contractor. (CA Labor Code Section 2753)
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