Legal Question in Employment Law in California

1099 vs W2's for sales/consulting

Was laid off by past employer in April 2004. Hired by another company in 7/2004 full-time and on a W-2. In 8/2004 my old employer contacted me and wanted to hire me back as 1099 independent contractor, I work for them now part-time as needed by my clients and I am 1099'd from them, payment is made to me based on a percentage of the profits from the jobs that I land. I work from my home for this company in the evenings/weekends. Basically my job that I am 1099'd would be classified as sales (contact clients, estimate, project management, consulting - employees of the company that I am 1099'd by perform the work I contract and they are all W-2'd). I pay my estimated taxes quarterly. The company that I am 1099'd by wants me to obtain a business license under consulting. Otherwise, they say I have to re-imburse them for workers comp. I checked the internet and meet the requirements of the IRS 20-point checklist for contractor classification. As an independent contractor in sales, do I need a business license? Workers comp is based on payroll, not 1099's, so how can this company charge me for workers comp?


Asked on 5/04/05, 6:11 pm

1 Answer from Attorneys
Terry A. Nelson Nelson & Lawless

Re: 1099 vs W2's for sales/consulting

It's not unreasonable for them to require a business license to substantiate that you run a business, consulting. It is part of their protection in contracting with you under 1099. The WCAB issue resolves when you do that.

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Answered on 5/05/05, 4:02 pm


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