California Requires All Businesses to Report the Hiring of New Employees and Independent Contractors

California Requires All Businesses to Report the Hiring of New Employees and Independent Contractors
Prepared By: Melissa C. Marsh, Los Angeles Employment Attorney Written: March 2009

Employer Registration - Setting Up an Account with the EDD

Before hiring any employees, a California business must first register with California's Employment Development Department (EDD) by completing Form DE-1. The form can be filed online, or relayed to the EDD via telephone. If relayed over the telephone, the EDD will require you to have already completed Form DE-1.

Hiring New Employees in California

All California employers must report ALL of their new or rehired employees who work in California to the EDD's New Employee Registry within twenty (20) days of their first day of work on Form DE-34. This includes employees of all ages, those who work less than a full day, part-time and seasonal employees, and of course full time employees. The following information must be reported on Form DE-34:

Your business name, address and California employer account number (a.k.a. Taxpayer Identification Number, EIN); and
The employee's full name, social security number, home address, and the date of the first day of work.

If you fail to provide the California Employment Development Department (EDD) with your New Hire information on time, the EDD may assess a penalty of $24 for each failure to report a new hire.

To report new employees, complete Form DE-34 and fax to 916-319-4400 or mail to:

Employment Development Department
Document Management Group, MIC 96
P.O. Box 997016
West Sacramento, CA 95799-7016

Hiring Independent Contractors in California

All California employers must report ALL of their newly hired independent contractors who provide a service (not goods) on Form DE-542 if: (1) you pay the independent contractor $600 or more, OR enter into a contract for $600 or more; and (2) the independent contractor is an individual or sole proprietorship; and (3) you will be issuing that independent contractor a Form 1099-Misc.

Please note that you only have to report independent contractors performing services as a sole proprietor. You do not have to report any independent contractor that is providing services through a corporation, limited liability company, or general partnership.

If the independent contractor is a sole proprietor, the following information must be reported on Form DE-542:

Your business name, address and California employer account number (a.k.a. Taxpayer Identification Number, EIN);
The independent contractor's full name, social security number, and address; and
The start date of the contract, amount of the contract, contract expiration date (or ongoing) and if there is no contract, the date payments equal or exceed $600.

If you fail to provide the completed form in a timely manner, the EDD may assess a penalty of $24 for each failure to report, and if the EDD determines that the failure to report the independent contractor was the result of conspiracy between the business and the independent contractors, the EDD may assess an additional penalty of $490.

To report newly hired independent contractors, complete Form DE-542 and fax to 916-319-4410 or mail to:

Employment Development Department
Document Management Group, MIC 96
P.O. Box 997350, MIC 96
Sacramento, CA 95899-7350

If you would like to hire Los Angeles, California employment law attorney Melissa C. Marsh to perform an employee audit, or to prepare your employee contracts, handbook, or policies please call 818-849-5206 or Send us an Email. A large part of our employment law practice consists of counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits.

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California employment lawyer, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and serves individuals and businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.