Fillable Printable Temporary Services And Employee Leasing Industries (De 231F)

Temporary Services And Employee Leasing Industries (De 231F)

6. Pays the worker from their own account or accounts.

7. Retains the right to hire and terminate workers.

If an individual or entity contracts to supply workers to

perform services for a customer or client and all of the

above seven functions are met, the individual or entity is

the employer of the workers who perform the services.

As the employer, the individual or entity is responsible

for reporting wages paid to the employees and paying

Unemployment Insurance (UI) and Employment Training

Tax (ETT) on those wages. Additionally, the individual

or entity is required to withhold and remit State Disability

Insurance (SDI)* and California Personal Income Tax

(PIT) due on the wages paid.

Example

A temporary services company provided employee

data processors to its client. The client provided

the materials, work space, and computer time. The

temporary services company performed the following

functions:

• Negotiated with clients for time, place, type of work,

working conditions, quality, and price of the services

of the data processors.

• Determined the assignments or reassignments of

the data processors.

• Had the authority to reassign a data processor who

was found to be unacceptable by the client.

• Assigned the data processors to perform the

services at the client’s business.

• Set the rate of pay of the data processors.

• Paid the data processors directly from its business

account(s).

•Retainedtherighttohireandrethedata

processors.

The company providing the data processors was the

employer responsible for reporting because it performed

allfunctionsasspeciedinSection606.5oftheCUIC.

Employment occurs when an employer engages the

services of an employee for pay. Under Section 621(b)

of the California Unemployment Insurance Code (CUIC),

employeeisdenedas“anyindividualwho,under

the usual common law rules applicable in determining

the employer-employee relationship, has the status of

an employee.” In general, a worker is a common law

employee when the employer has the right to control the

manner and means of accomplishing the desired result.

Section606.5oftheCUICspecieswhoshallbe

considered the employer of common law employees in

the temporary services and employee leasing industries.

WHAT ARE TEMPORARYSERVICES AGENCIES AND

EMPLOYEE LEASING AGENCIES, AND ARE THEY

THE EMPLOYERS OF THE WORKERS THEY PLACE

IN EMPLOYMENT?

Determining who is the actual employer of a worker

is a two-part process. First, the worker must be an

employee under the usual common law rules. If the

worker is determined to be a common law employee,

thentheemployermustbeidentied.

A temporary services employer and an employee leasing

employer are employing units that contract with clients

or customers to supply workers to perform services for

the client or customer and perform all of the following

functions:

1. Negotiates with clients or customers for matters such

as time, place, type of work, working conditions,

quality, and price of the services.

2. Determines assignments or reassignment of

workers, even though workers retain the right to

refusespecicassignments.

3. Retains the authority to assign or reassign a

worker to other clients or customers when a worker

isdeterminedunacceptablebyaspecicclientor

customer.

4. Assigns or reassigns the worker to perform services

for a client or customer.

5.Setstherateofpayoftheworker,whetherornot

through negotiation.

*Includes Paid Family Leave (PFL).

TEMPORARY SERVICES AND EMPLOYEE LEASING INDUSTRIES

DE231FRev.7(10-09)(INTERNET)Page 1 of 2 CU

Under What Circumstances Is the Client or Customer

of the Agency the Employer of the Workers?

If an individual or entity who contracts to supply workers

to perform services for a customer or client is not a

leasing employer or temporary services employer (as

described above), the client or customer would be the

employer for UI, ETT, SDI, and PIT purposes. If the

individual or entity contracting to provide the worker pays

the worker, the individual or entity would merely be the

agent of the client or customer and not the employer.

RefertoSection606.5(c)oftheCUIC.

When Employers Loan Employees to Other

Employers, Who Is the Employer of the Loaned

Employees?

In circumstances where an employee is loaned by one

employer to another employer, the loaning employer

remains the employer responsible for UI, ETT, SDI,

and PIT purposes if the loaning employer continues

to pay remuneration to the employee, whether or

not reimbursed by the other employer. However, if

the employer to whom the employee is loaned pays

remuneration directly to the employee for services

performed, that employer shall be considered the

responsible employer for employment tax purposes

for any remuneration paid to the employee by such

employer. This is true regardless of whether the loaning

employer also pays remuneration to the employee.

RefertoSection606.5(d)oftheCUIC.

ADDITIONAL INFORMATION

For further assistance, please contact the Taxpayer

AssistanceCenterat(888)745-3886orvisitthe

nearestEmploymentTaxOfcelistedintheCalifornia

Employer’s Guide (DE 44) or access EDD’s Web site at

www.edd.ca.gov/payroll_taxes/.

EDD is an equal opportunity employer/program.

Auxiliary aids and services are available upon request to

individuals with disabilities. Requests for services, aids,

and/or alternate formats need to be made by calling

(888)745-3886(voice),orTTY(800)547-9565.

This information sheet is provided as a public service and is intended to provide non-technical assistance. Every attempt has

been made to provide information that is consistent with the appropriate statutes, rules, and administrative and court decisions.

Any information that is inconsistent with the law, regulations, and administrative and court decisions is not binding on either the

Employment Development Department or the taxpayer. Any information provided is not intended to be legal, accounting, tax,

investment or other professional advice.

DE231FRev.7(10-09) (INTERNET)Page 2 of 2