Independent contractors, unlike employees, are not entitled to claim unemployment insurance. But if a worker believes she was wrongfully classified as independent contractor, instead of an employee, she can file a claim for unemployment.
Normally, if an employer disagrees with the decision of the California Unemployment Insurance Appeals Board (CUIAB), it may appeal the decision by filing a writ of mandate. However, if the decision requires the employer to pay a tax, it cannot appeal or challenge the decision until the tax is paid, pursuant to California Constitution, article XIII, section 32.
In West Hollywood v. CUIAB, (2014) 232 Cal.App.4th 12, the Court of Appeal considered whether the hirer may appeal a CUIAB decision that an independent contractor is in fact an employee (and thus owed unemployment benefits). The court rejected CUIAB’s argument the decision could not be appealed pursuant to Section 32 because it required payment of a tax.
This appeal requires us to consider whether an employer may obtain judicial review of a decision from the California Unemployment Insurance Appeals Board (the Board) finding that an applicant for unemployment benefits was an employee, not an independent contractor. The Board argues that decision is not subject to judicial review because both the California Constitution and the Unemployment Insurance Code bar actions whose purpose is to prevent the collection of state taxes. Appellant recognizes that actions seeking to avoid a tax are prohibited, but argues that this case does not challenge the imposition of a tax. We agree with appellant and reverse the judgment.
First, the Board acknowledges that “the charge to Voda Spa’s reserve account resulting from benefits awarded to Serban is not a tax payment within the meaning of article XIII, section 32 or section 1851. The only effect of the charge, is the likelihood that Voda Spa’s future reserve ratio will decrease, resulting in a higher future contribution rate.” … Because there was no assessment in this case, the pay now, litigate later rule, is simply inapplicable.
