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ASK THE EDD ATTORNEY – WERE YOU REALLY AN INDEPENDENT CONTRACTOR? HOW TO BE PREPARED FOR THE WORKER INTERVIEW QUESTIONNAIRE – PART 1

By Robert S. Schriebman

May 24, 2016

Introduction

In a typical EDD audit it is standard operating procedure for the EDD to contact workers who were treated as independent contractors. The EDD will either send out a Worker Interview Questionnaire for the worker to complete and return or will call the worker to ask the same questions over the phone. It is important to know in advance what these questions will be. Sometimes the EDD auditor will send out post cards requesting that the worker contact the EDD for an interview.

This is Part 1 of a several part series of articles dealing with EDD’s probing questions set forth in the Worker Interview Questionnaire to determine if the worker was truly an independent contractor. The EDD obtains the list of workers from any one or more of several sources such as 1099s, Employer Interviews, General Ledgers, or referrals from other interviewed workers.

At this point in our discussion it is very important that you are made aware of certain ground rules regarding the EDD’s attempt to solicit information from current and former workers. First, it is illegal for an employer or anyone else to advise a potential interviewee not to answer these questions. This can lead to criminal prosecution. Never tell anyone that he or she should refuse to talk to the EDD. Former workers as well as current workers are witnesses in an EDD audit. A witness does not belong to anyone. Second, no one is legally obligated to answer any questions unless ordered to do so by a judge.

If you are being interviewed by the EDD with regard to the questions presented in this article, be sensitive to any EDD caller who is trying to get you to answer any questions in a specific way. Always answer any question honestly and in your own words. Do not let anyone put words in your mouth.

It is my goal in setting forth these questions, to give you insight and to allow you to get a "heads-up" so-to-speak. A knowledgeable interviewee is a prepared interviewee.

Questions Relating To Initial Employee/Contractor Status

Most of these initial first questions are basic inquiries. However they may play into the EDD’s agenda to most workers in California be W2 employees. The questions are designed to establish an employer-employee relationship as oppose to a worker-independent contractor relationship. It is for certain that whatever the interviewee states will be used against the employer.

  • Did you perform services for this employer?
    Bob’s comment: Note that this seemingly simple question begins to establish an employer-employee relationship. Employee vs. independent contractor audits are always about services and not about goods bought and sold.

  • What type of services / work did you perform?
    Bob’s comment: This is a proper question but it is also the beginning of an EDD mindset to establish an employer-employee relationship for the services performed in the past.

  • What period did you work?
    Bob’s comment: This is a proper question but it is also the beginning of employer’s exposure to an audit that may extend beyond the normal 3-year – 12-quarter audit period. If the employer failed to file quarterly payroll tax returns for acknowledged W2 wage earners, the employer will have exposure to a possible 8-year examination period.

  • How did you get the job?
    Bob’s comment: While this appears to be a simple straight forward question, the EDD is looking to determine whether the employer actively solicited the worker. Solicitation is an indication of employer control which is the key element in establishing an employer-employee relationship. The EDD is always interested in how the worker came to work for the employer.

  • Did you have to complete any type of employment application?
    Bob’s comment: If a worker completed an employment application, he or she is clearly an employee. The application process clearly demonstrates that the employer had control over the worker from the very beginning.

  • Were the services performed under a verbal agreement or per a written agreement?
    Bob’s comment: Under the famous IRS "20 factor test" the presence of a written contract establishing an independent contractor relationship is an important factor in determining that relationship. However it is not ipso-facto the sole determining factor. The EDD, however, has a "23 factor test" that does not mention the presence of a written contract at all.

    I have representing employers before the EDD for many years. In all those years I have never seen an audit where the presence of a written independent contractor agreement convinced any auditor that the worker was truly an independent contractor. It is in my opinion it is impossible for a lawyer to draft an independent contractor agreement that will convince the EDD that the worker is truly an independent contractor.

Conclusion

There are many more questions contained in the EDD Worker Interview Questionnaire. While some questions appear to be simple and straight-forward, other questions carry great potential harm and risk of assessment. In our next article, we will continue our review of the Worker Interview Questionnaire.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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