QUESTION
Are there any repercussions when hiring a staff as a 1099 when they are suppose to be a w2?
Asked on Sep 11th, 2018 on Business Law - California
More details to this question:
We hired a receptionist with a possibility for her to be an esthetician, which gets paid as a 1099. After two years of being a 1099 and no esthetician license, we finally changed her to a w2. It has been 3 months since she is a w2 and we have to let her go due to slandering our business. 1. Is this reason grounds for immediate termination 2. Are there any repercussions for paying her as a 1099 when she should have really been a w2?
1 ANSWER
Absent a contract limiting your right to fire her, you can terminate her employment at any time for any reason other than those prohibited by statute, i.e. based on race, religion, etc. If you're asking about unemployment insurance considerations, I am not familiar with California's unemployment insurance laws, but I would be surprised if denigrating your business was not cause for termination.
However, there are issues with paying someone as an independent contractor (1099) when they should have been classified as an employee (W2), because employers are required to withhold various taxes from employee's paychecks. If you did not withhold taxes because this person was classified as an independent contractor, it cculd lead to serious issues with taxing authorities. I would advise you to consult a California attorney about this.
Answered on Sep 12th, 2018 at 8:21 AM