©2023 Seyfarth Shaw LLP www.seyfarth.com 2023 Cal-Peculiarities | 25 contractors instead of employees. During a payroll tax audit, the EDD obtains accounting records and makes onsite visits. The review period is generally up to three years. The audit aims to see if everyone paid for services was properly classified as an employee or independent contractor and if wages and taxes were properly reported. Audits, if they go badly for the employer, can result in an assessment of additional taxes and penalties due. The employer may petition for a reassessment or for a hearing before an administrative law judge. The significance of correct classification looms especially large in light of the hefty potential civil penalties for employers and their outside, non-attorney advisors who engage in “willful misclassification” of workers as independent contractors.56 1.6.3 EDD regulations and checklists with respect to employment status The EDD has comprehensive regulations applying the common law to questions of whether workers are employees or independent contractors. The regulations state that the most important factor is the right of the principal to control the manner and means of accomplishing the desired results, but they also list ten other factors to consider.57 The regulations explain how to apply these rules in various industries, including real estate, home health care, computer services, newspaper distribution, process servers, banking, and cosmetology.58 A comprehensive EDD checklist provides guidance in determining whether the service provider is an employee or an independent contractor. But in 2019 the Legislature re-wrote the rules of the game, creating a presumption of employment status for any worker providing service to a hiring entity unless the entity can satisfy the ABC test as to that provider.59 (See § 19.7.) 1.7 Unemployment Insurance Appeals Board (UIAB) The UIAB hears claims for unemployment and disability benefits. These cases are appeals from administrative determinations made by the EDD. The UIAB also hears petitions from taxpayers concerning assessments made by the EDD’s Tax Branch. The initial hearings and decisions are heard in eleven Offices of Appeals throughout the state. These offices conduct the first level of appeal. An administrative law judge presides, and takes taperecorded testimony under oath (see § 15.3). A losing party at the first level may appeal to the second level.60 1.8 Division of Workers’ Compensation (DWC) Workers’ compensation cases brought by injured workers (“applicants”) are heard by workers’ compensation referees employed by the DWC. Any settlement of a workers’ compensation case must be in the form of a compromise and release or stipulations with request for award. A compromise and release extinguishes liability for future medical care in return for a lump sum payment. A stipulation with request for award leaves open the injured worker’s entitlement to future medical treatment. Both types of settlement must be approved by a workers’ compensation referee. The standard “C&R” form used to effect a compromise and release will not release an individual’s civil claims against the employer61 and a civil release alone cannot settle a workers’ compensation claim.” Applicants’ attorney fees also must be approved by a workers’ compensation judge, and are generally 915% of the settlement amount.62 Only the WCAB can resolve workers’ compensation issues. It can not be resolved in a Settlement and Release on the civil side without WCAB approval. 1.9 Workers’ Compensation Appeals Board (WCAB) The WCAB is a seven-member judicial body appointed by the Governor and confirmed by the Senate. It reviews petitions for reconsideration of decisions by workers’ compensation administrative law judges of the DWC and regulates the adjudication process by adopting rules of practice and procedure. A WCAB decision is reviewable only by the appellate courts.
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