Californians running their own businesses are accustomed to having an invasive government. They are also used to the government taking the side of their employees and being considered guilty until proven innocent on any claim asserted against them. But when your company is outside of California, you certainly do not expect these things to happen to you. That is apparently no longer true.

I was contacted by a man named Ben from New Jersey who was referred to me by a client from New York. Ben tells me he had contracted a man to do a website for him that happened to originate from California. He tells me that the man had his own corporation, but for a time during the contract the Computer Maven (Maven) had to be paid directly because his corporation was in formation. Ben tells me he was contacted by Jennifer McPeak from the Employment Development Department (EDD), who asked him a series of leading questions that made him very uncomfortable. Ms. McPeak was asserting Maven had been an employee of Ben’s company and that he had to file for payroll for Maven. My first instruction to Ben was never speak to a California employee as a businessman without a hired gun like me taking over for him.

I sent a Power of Attorney on Ben’s behalf to Ms. McPeak and then spoke to her. She told me she was issuing a report soon, but gave me every indication her report would treat Maven as an employee of Ben’s company while he was doing Ben’s website. She cited a list of facts, including that there was no written agreement. She even asserted that Maven was an employee of Ben’s even after his corporation was formed.

I told her nicely she was out of her mind. I also informed her that California law did not require a written contract for this arrangement and that the facts are not altered in the absence of one. I then asked to speak to her supervisor.

After I spoke with my client, Ben, I found out there was a written agreement; that most everything Ms. McPeak had told me was false, and that Maven would back him up. I then spoke to Ms. McPeak’s supervisor, Brenda Smith, who agreed to send me a copy of their report. I informed Ms. Smith that there were significant factual misstatements by her staff person, but she did not seem to care.

The six-page report read like something Pravda would have been proud of producing. It used catch words and painted a picture that would lead someone who did not have any other info to believe that Ms. McPeak’s conclusion that Maven was an employee of Ben’s was pretty clear. The report cited that Ben asserted significant control over Maven’s work. It even stated there were other employees (6-8) of Ben’s that were helping direct Maven.

I sent two documents to Ms. Smith. First, a letter I drafted for Ben disclaiming most of the assertions in the report and attached a copy of a signed contract between Ben’s corporation and Maven’s corporation. We refuted any kind of control over Maven’s work accept making sure he completed the website timely. We stated that Ben had no other employees other than himself. As Ben told me, he helped direct Maven like he would a plumber: there is the leak — fix it. We filed a complaint against Ms. McPeak for negligence and for ginning up a case where she ignored the facts.

Second, we sent a letter from Maven stating he had his own business; checks from Ben to him personally were only to accommodate him while his corporation was in formation. Maven had a misguided idea he could get unemployment from his own corporation while he was out of projects. That is why he had made the claim and it had nothing to do with his work on Ben’s website. When Maven found out he could not get the benefits from his own corporation he dropped the entire matter, but Ms. McPeak kept calling him (which he ignored), even though he had asked it to be dropped.

Despite that Ms. McPeak asserted that Ben was guilty and Maven was his employee.

I followed up with Ms. Smith. She said she was not changing the report and that she had referred my complaint against Ms. McPeak to her boss, Simon Ramsubhag, the area manager for Sacramento audits. Mr. Ramsubhag told me he would not change the report and told me any disciplinary action was not open to the public. I told him that seemed pretty unfair that any claim against us for bad behavior was public, but if we wanted to find out about a claim for malfeasance against an employee it was sealed. I asked to speak to his supervisor.

Jennifer Stuhr is the Northern Region Audit Manager. I detailed to her the fact that the report was faulty and we had submitted clear evidence of such from both sides that her staff had ignored. Ms. Stuhr promised me a fresh face would look at the file. I was called by a new staff person who asked me to fill out a form, took about a half hour reviewing the facts, and called that he was reversing the claim.

When I called Ms. Stuhr, I thanked her for handling the matter correctly. But I admonished her that it should have never gotten to her level. It cost my client a significant sum (even with me eating time to prove a point) and wasted a lot of time and energy. I informed her I would be writing this column because business owners should not be abused like this and their money wasted. Most people don’t have a Bruce Bialosky (aka “a fixer”, aka Ray Donovan without the blood) to get things like this killed and thus they suffer the consequences.

More importantly, why would business owners like Ben from other states engage small businesses in California and open themselves up to such harassment? This is just one more job killer for the small businesses of California. The government of California and its employees don’t even stop at the border when harming our businesses.