"Tony Cox" <tc[at]coxrt.com> wrote:
- quote -

Sorry, I don't have any other information off the top of my
head.

- quote -

The criteria might be different because the purposes and
effects (and standards) of the laws might be different. So
state laws making someone an employee for unemployment or
workers compensation purposes (e.g. real estate salespeople)
would be unrelated (though similar) to the federal
requirements for income tax purposes.

Stu

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Stuart A. Bronstein wrote:
- quote -

As it happens, I met a fellow who claimed his "employees"
were indeed ICs for federal tax purposes, but because he was
paying UI insurance, they didn't need to have the business
licenses (which would otherwise have been required under
municipal ordinance). Naturally, I thought he was trying to
have it both ways! Do you have any further details??

Anyway, in the general case (different classification
criteria for states vs. federal), this must simply be a case
of state hubris. One could conclude from your answer that
any state criteria ought to be ignored, and the
classification simply be made under federal guidelines.

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"Tony Cox" <tc[at]coxrt.com> wrote:
- quote -

I haven't heard of that happenning. But I have heard of
people being determined to be one status for income tax
purposes but the other status for unemployment insurance.

Stu

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"Shyster1040" <Shyster1040[at]nospamhotmail.com> wrote:

- quote -

Since the IRS uses a 20-step test, it occurs to me that it
is quite possible for someone to be classified as an IC from
the state's point of view, but as an employee as far as the
Feds are concerned. Or vice versa.

Anyone know what happens in this case?

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Unfortunately, your mother finds herself in the ugly grey
area between the categories of "employee" and "independent
contractor."

First, until you and your mother have concluded that Maria
is an "employee," you should refrain from calling the money
your mother pays her "wages." In this instance, use of that
term assumes the conclusion you're trying to figure out -
namely, whether Maria is, or is not, an "employee."
"Employees" receive wages; "independent contractors" receive
remuneration or compensation.

Second, unfortunately, the publication you refer to, DE8829,
is not very helpful. DE8829 only obliquely refers to the
fact that the UI provisions only apply if a household worker
is a "commonlaw employee" but then never discusses the
factors that go into determining when a worker is, or is
not, a commonlaw employee, and simply assumes throughout the
rest of its discussion that a household worker such as Maria
is an employee.

For a more nuanced view of the situation from the State of
California, take a look at the 24 factors that the State
itself uses to determine whether a worker is a commonlaw
employee. These factors can be found in Attachment I to the
following memorandum: http://www.edd.ca.gov/taxrep/ee-ic.pdf

Some of those factors simply won't apply to the relationship
between your mother and Maria, in which case they should be
given a "neutral" weighting; otherwise, you can go over the
factors and determine if they favor "employee" or
"independent contractor" status for Maria. Unfortunately, it
is generally the case that not all of the factors will be
given equal weight by a reviewing court. Those factors that
are more formalistic, e.g., the labels or terms the parties
use, or with respect to which the parties do not have
adverse interests, are often given less weight than those
factors that represent issues as to which the parties have
divergent economic interests, e.g., payment of travel
expenses - to the degree that one party takes on the
obligation to pay these expenses, the other party has an
economic gain commensurate with the payor party's expense.

The basic litmus test, which is as easy to state as it is
useless, is that an employer/employee relationship exists
where the putative employer retains the right to control the
manner and means by which the putative employee performs the
tasks in question.

Some of the more substantial factors most likely include:
1) Giving detailed instructions;
2) Worker's ability to unilaterally substitute another
person if the worker needs a day off;
3) Work is performed for a number of different people;
4) Payment is by the job upon completion of the job rather
than by the hour;
5) The degree to which the worker provides her own tools and
materials;
6) The degree to which the worker has control over costs
incurred in performing the work, e.g., in your case, does
your mother provide all of the cleaning supplies, or does
Maria, and if Maria does, could she significantly increase
her net income by buying in bulk or establishing a
relationship with a supplies vendor to buy supplies at a
discount;
7) Whether the worker offers her services to the public,
i.e., holds herself out to the public as being engaged in
the business of providing cleaning services;
8) Whether the worker is in a position to make "business
decisions," e.g., as a practical matter, is Maria in a
position to identify people who would pay her more for the
same services, and is she free to stop providing your mother
services if she finds a better-paying opportunity.

Unfortunately, you may come to the conclusion, even after
going through the California factors, that the issue is too
close to call, or else that Maria is an "employee." Based
on the nature of the issue and the limited facts you gave,
there is no way that I can give you any really reliable
advice on the question itself. In that case, you could
either accept the conclusions you draw, and act accordingly,
or you could seek an employment work status determination
from the California Employment Development Department. See
Form DE38, which can be downloaded at the following link:
http://www.edd.ca.gov/taxrep/de231es.pdf

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My mother pays someone to come into her house twice a week
and do various cleaning chores.

I am trying to understand my mother's responsibilities with
respect to Calif employment laws -- especially the UI and
ETT taxes. I have been reading DE 8829 and other relevant
publications. I am very confused -- or surprised.

I believe that person, Maria, works 8 hours each of the two
days. Maria works in other people's homes on other days of
the week. Maria is not an employee of a housekeeping
service. I believe she is a US citizen. My mother pays
Maria more than $1000 in cash wages per quarter, but less
than $9000 annually.

Based on those facts, I believe my mother must register with
the Calif EDD as an employer, and I believe my mother must
pay UI and ETT taxes as well as withholding SDI. (Assume
that Maria agrees that my mother will not withhold PIT.)

Is that right?

I am surprised that ETT applies to a housekeeper.

I am also unclear about happens with the UI percentage over
time. The whole "UI reserve account" thing is unclear to me.

As I understand, the UI tax rate starts at 3.4%. It might
rise to as much as 6.2%. But under what circumstances? Can
the UI tax rate become less than 3.4%?

Moreover, if Maria quits all of her jobs (as she did last
year after her husband was killed), if she collects
unemployment insurance, how does that affect my mother's UI
tax rate, if at all?

Since Maria worked only parttime for a number of household
employers, it is not clear to me whom she can list as "last
employer" for the purposes of determining the UI tax rate.

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