But can I know the chances of penalty reducing or revision, since I have two W-2 employees and there is no clear cut line of defining 1099 and W-2s, so I put them as 1099. Is there a chance that I will be penalized more since I was told she just citated the last 6 month's finding, as I only have 6 months' record.
A: California law is extremely
hostile to the use of 1099-Misc contractors in circumstances where a W-2 employment relationship should ordinarily exist. If you want to know how a challenge is likely to turn out, use form DE 38,
and as objectively as you can, try to determine how you would rule, if you were to review all of the factors in the DE 38 form. If you determine that this person is an employee, then while you could make the appeal, you will almost certainly lose, and then the best you can do is to ask the court for some relief, because you believed that the person qualified as an independent contractor.
I don't know how great your fines are, but DLSE is likely to permit you to pay the fines in installments. That is probably the best you can do under the circumstances.
I don't think you lose anything by appealing -- but if that DE 38 form appears to strongly favor the worker as being an employee, then the result will be little different from your current citation and fine -- unless you can produce records showing that the worker was employed for a reduced number of hours or that the employment started more recently than the DLSE has determined.
I realize this is a terrible punishment -- frankly, it happens every day, because most employers just don't realize how easy it is to get caught and fined.
Please let me know if I can be of further assistance.