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Joseph
Joseph, Lawyer
Category: California Employment Law
Satisfied Customers: 4893
Experience:  Extensive experience representing employees and management
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my nameis mike and i own a test only smog station inc. in Feb.2013

Resolved Question:

my nameis mike and i own a test only smog station inc. in Feb.2013 we hired a smog tech.
just before we hired him i went to iran for 2 months to take care of my 9o year old dad.
i came back mid april and my partner told me that the tech. was asking for cash only and i convinced him to take 350 in cash and 350 company check weekly.in june 2013 the tech. asked me to give him W2.i called my accountant and he advised me to give him a check for 500 each week and deduct 49 dollars for SS,EDD..etc. he refused to take the check because he needed a W2check with all the deductions listed and i agreed ten mins. later he suggested that he could take all his income in cash because he doesnt want to pay any taxes. i put up with all the abuse simply because i cant operate my bus. without a star tech. end of july he complains about the load of work in the shop.therefore i had to hire another smog tech.so the work would divided between both of them.from the first day they started fighting and the reason for fighting was the interference of the first tech. so i sat down and advised them not to fight specially in front of customers.fight continued again and i told them they could both work 3 days a week.my first tech. got offended,packed up his staff and left. i also told him that i have 3 other jobs lined up for him at other smog stations.since he left he has been threatening me to put me in jail and asking me to get 3 lawyers for workers comp. EDD and illegal smog tried to reason with him and pay him some money monthly till he finds a job he says i am suing you for 20 to 30 thousand dollars.i am stuck,don,t know what my options are my phone number (XXX) XXX-XXXX
Submitted: 11 months ago.
Category: California Employment Law
Expert:  Joseph replied 11 months ago.
Hello and welcome to JustAnswer.

I'm sorry to hear about your situation and hope I can help.

JustAnswer experts cannot contact customers on the phone, and your number was XXXed out.

I can only 'justanswer' questions for you online here.

If you have one you want me to answer based on your situation, I would be happy to do so.

Can you also tell me:

1) what's the basis for his suit for 20-30k

2) do you have workers' compensation insurance and was the employee injured?

3) did you fail to pay taxes on him as an employee (payroll taxes) since you were paying him in cash? did you report him as an employee at all (W2) or was all the money he received 'under the table'?

4) what money are you paying him now and what's the purpose of it? have you tried to make a 'settlement'?
Customer: replied 11 months ago.

I did not have workers comp.and there were no injuries and no payroll taxes because we agreed on 1099.right now i am not paying him anything since he left 2 weeks ago.


my basic question at this time is what will happen to me legally if i 1099 an employee and naturally i could not get workers comp. because of that

Expert:  Joseph replied 11 months ago.
Hello Mike,

Honestly, you could face some relatively serious fines and penalties for mis-classifying your employee as an independent contractor and failing to maintain workers' compensation insurance on him as you are required to do under the law. (It doesn't matter if you agreed on 1099. You have to classify an employee as an employee under the law and any agreement you have with the employee is inconsequential if he should have been an employee).

You also could be liable for back taxes due to your failure to pay payroll taxes on the employee as you are required to do under California and federal law.

It's difficult to estimate your total liability, but it could be in the thousands of dollars, and could very well exceed $10,000. There could be additional penalties if you failed to pay overtime as required under the law as well, or if you failed to pay wages that were owed at the time of termination. Of course all this depends on what EDD, the Franchise Tax Board, and the IRS could find out.

That said, it would be best to reach a settlement agreement with your former employee. However, you cannot actually have an agreement that prevents him from reporting his suspicions of illegal activity the appropriate agencies, so unless you can placate him that he will not report you, it would probably not even be worthwhile to reach a settlement.

All in all, the only good thing that will likely come from this experience is that you need to correctly classify employees, should pay them with statements including deductions, etc., and pay all your taxes in accord with the law. Otherwise, you can face serious fines and penalties and could be shut down if you fail to pay them.

I realize the above information is not what you wanted to hear and I sincerely XXXXX XXXXX had better news to give you, but I hope you appreciate an honest and direct answer to your question. It would be unprofessional of me and unfair to you to provide you with anything less.
Please let me know if you have any follow up or clarifying questions as I want to ensure that you are completely satisfied with my service.

If not, please remember to rate my answer positively so I get paid for my work. (If I don’t receive a positive rating, I get nothing for assisting you, as I only receive payment for questions with positive ratings. Even if you made a deposit, it is still necessary to rate me positively for me to receive payment from your question).

Thanks and best of luck!
Joseph, Lawyer
Satisfied Customers: 4893
Experience: Extensive experience representing employees and management
Joseph and other California Employment Law Specialists are ready to help you

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