A general contractor classifies its on-site framer as an independent contractor and issues a 1099-NEC instead of a W-2. If the framer is later determined to be a W-2 employee under AB-5 and federal common-law tests, the general contractor will likely be liable for:

Explanation

Misclassification stacks two kinds of liability. The tax side is federal income tax withholding and both FICA shares under IRC §3402 and §3111, FUTA under §3301, and California PIT, SDI and UI through the EDD, with the reduced rates of IRC §3509 available only if the failure was not wilful. The labour side is a Labor Code §226.8 penalty of $5,000 to $15,000 per wilful violation, or $10,000 to $25,000 where there is a pattern, plus wage-statement penalties under §226(e) and uninsured-employer exposure for workers' compensation. A signed acknowledgment changes nothing, because Labor Code §2775(a) disregards the label the parties use. And the information-return penalty is a rounding error beside the rest.