Employer did not withhold any taxes, nor pay UI, SDI or anything that is required .... do I have a claim for unpaid wages?

Asked over 2 years ago - Long Beach, CA

employer misclassified me and at least 6 others as independent contractors for work that required a class A contractors lisc. none of us have contractors lisc's in California (http://www.edd.ca.gov/pdf_pub_ctr/de231g.pdf) making us "Statutory employees"

What steps do I need to take to protect myself and bring this company that is operating in the "Underground Economy" to justice for fraud?

Furthermore the company is refusing to provide me with any type of documents for filing taxes I used email for my last request, received email response stating NO tax documents would be sent to me since they would not be reporting any income on my behalf to irs!!


Does failure of employee to pay state taxes ect. count as wages and entitle me to relief Pursuant to California Labor Code § 203?
Thank You

Additional information

I am not asking about federal taxes in this post
I am not asking IF I was employee or independent contractor, My post would be a book if I listed all the factors that make me an employee, There where NO factors that qualified me as a independent contractor (other than employer not withholding taxes) Besides I have worn my keyboard out searching ca.gov websites ... I assure you I was an employee.

Attorney answers (3)

  1. Curtis Lamar Harrington Jr

    Contributor Level 20

    3

    Lawyers agree

    1

    Best Answer
    chosen by asker

    Answered . Don't get too excited. Independent contractor has not so much to do with a contractor's license.

    I have just written an article on this from the standpoint of the reverse of the traditional IRS safe harbor rules (which are at risk now that IRS has "declared war" on independent contractors.

    http://patentax.com/library/contractor.html

    Look at the factors in the paper and see if they apply to you.

    Maybe you are upset that you will have to pay your taxes and have failed to plan for it or failed to pay your quarterly estimated tax as independent contractors are required to do.

    You are responsible for your own tax in any event.

    Now, whether your payor has you classified correctly will depend upon your job duties, control, regularity, and independence. You may win or you may lose.

    It is also within the realm of probability that if you challenge your payor's relationship with both you and the other employees that you may lose your status completely.

    Further, your 6 other independent contractors, if forced into employee status may have a number of negative effects:

    (1) a reduction in salary of possibly 15-25% for the accounting, payroll services, employer contribution to social security and the medicare block, as well as worker's comp insurance charges and more.

    (2) You and your 6 others will lose the ability to file schedule C and deduct business expenses including cell phone, possible mileage, insurance, and much more.

    Your employer might just quit business. This might be done by shutting down the entity(corp or LLC) and starting a new one at another location with other new employees.

    Have you filed your quarterly estimated income tax statements and advance payments for the past year?

    Did you sign an agreement to indemnify your employer or otherwise warrant that you are an independent contractor?

    You said "refusing to provide me with any type of documents for filing taxes". You must report and pay tax on your income regardless of how earned. You must pay based upon the money you received as an independent contractor whether or not your payor issued a 1099.

    Somehow, you have concluded that you are not an independent contractor even though you may be an independent contractor.

    When you started work did you complete a W4 indicating your exemptions? This is normally done when you are an employee.

    A statutory employee under California Law is a question of fact, and a question of whether you are engaged in certain occupations.

    The usual term "statutory employee" is an occupation plus circumstances that force the employee/employer relationship. For example if you are a California licensed Broker, the IRS has ruled that you are an employee when you work for as a loan officer.

    There is an employment law firm in Long Beach, Linda Krieger with Krieger & Krieger. http://www.kriegerlaw.com/Linda%20Krieger.html

    She is close enough that you can give her a visit next week. Talk it over and see what she has to say.

    In many cases it will not 100% employee and not 100% independent contractor, and you may end up paying to have it litigated. Even if you do, and if you win, the tax difference would be an employer's part of the social security/medicare contribution or about 8-11 %

    There may be state employment effects, but I will leave you to cover that with Linda...

    Please remember to designate your question's BEST ANSWER.

    Curt Harrington
    (562) 594-9784
    curt@patentax.com

    Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal... more
  2. Frank Wei-Hong Chen

    Contributor Level 20

    3

    Lawyers agree

    Answered . No, failure to pay or withhold taxes is not considered unpaid wages which would entitled you to waiting time penalties under Labor Code section 203. The penalty applies to the willful failure to pay "any wages," which refers to the definition of "wages" in California Labor Code Section 200.

    You have a plethora of legal issues which stems from the fact that you were misclassified as an independent contractor rather than as an employee.

    As such, you need to consult with an employment attorney to rectify this situation.

    California has new legislation effective January 1, 2012, which imposes dramatic penalties on employers found to have engaged in “willful misclassification” of workers as independent contractors, as well as on non-lawyer advisors who knowingly counsel to engage in such reclassification.

    SB 459 (which adds Sections 226.8 and 2753 to the California Labor Code) makes employers liable for civil penalties of $5,000 to $15,000 for each violation of “willful misclassification” of employees as independent contractors.

    In addition, if it is found that the employer has a pattern and practice of misclassifying independent contractors, the penalties can increase to a minimum of $10,000 to $25,000 per violation.

    The new law also imposes non-monetary penalties by requiring posting of a notice on the website or in a public area of the employer for one year if the employer is found to be in violation.

    Frank W. Chen is licensed to practice law in the State of California. The information presented here is general in... more
  3. Steven J. Fromm

    Contributor Level 20

    3

    Lawyers agree

    Answered . The IRS is cracking down on this area. For more on this please see my article Employers Playing Tax Games with Workers: IRS Offers Way to Come Clean at the following link: http://www.sjfpc.com/IRS_Payroll_Taxes_VCSP.html.

    Most importantly just recently many states have entered into a joint enforcement effort with the IRS on this issue. Not sure if CA has joined in but you may want to call their labor department or whatever they call it.

    You really need to speak directly with a labor/employment lawyer in your state as you are going to need their help sooner or later. No one at this forum can give you the specific advice you need and searching the internet will only take you so far. Get a lawyer involved now!


    Hope this helps.

    Please remember to designate a best answer to your question.

    Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website for more tax, estate and business articles is www.sjfpc.com. and his blog is

    LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia... more

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