Why it matters
EDD audits look back three years, sometimes longer. A single misclassified worker becomes a pattern once auditors pull the full contractor list: back payroll taxes, penalties, and interest apply to every role that fails the ABC test, not just the one under review. Contractors without a documented basis for their status are the fastest way to turn a routine audit into a company-wide reclassification.
How we do the work
Engagement inventory
We pull every active 1099 relationship on file, contracts, invoices, scope-of-work documents, and map each one against the work actually performed, not the title on the agreement.
ABC test application
Each role gets tested against Labor Code section 2775: outside the hirer's control (A), outside the usual course of the hirer's business (B), and independently established in that trade (C). Statutory exemptions under sections 2776 through 2787, evaluated under the Borello factors, get checked separately.
Documentation build
We assemble the file EDD actually asks for in an audit: signed contracts, invoice history, proof of independent business (license, other clients, own equipment), and a written basis memo for each classification.
Gap flagging
Weak points such as exclusive engagement, company-issued equipment, and set schedules get flagged before an EDD examiner finds them, with remediation options laid out for each one.
Audit-ready handoff
The final package is indexed and retained for EDD's lookback window, with a clear escalation point to counsel built in for any role the ABC test does not resolve cleanly.
What you receive
- ABC test worksheet per contractor role, prong-by-prong findings under Labor Code section 2775 with citations
- Written classification basis memo for each 1099 relationship, stating the specific facts supporting the call
- Audit-ready documentation package (contracts, invoice history, business license, evidence of independent operation) indexed for EDD production
- Gap and remediation log flagging classifications at risk before an audit starts
- 1099-vs-W-2 comparison ledger for payroll and HR reference going forward
Worker-classification documentation support runs as a compliance-admin module at an anchor rate of $349 a month. One-time classification reviews can be quoted flat after a roster review; final scope is confirmed in the countersigned engagement. Configure this service and see your estimate in the engagement builder.
Questions contractors ask
Does this replace a legal opinion on worker classification?
No. We build and test the documentation record against the ABC test and flag where a role does not clearly pass. Any classification that stays disputed, or carries real legal exposure, goes to your employment counsel before you act on it.
What actually triggers an EDD classification audit?
Common triggers: a former contractor files for unemployment, a workers' comp claim naming a 1099 worker, a referral tied to an IRS Form SS-8 determination, or random selection. EDD's lookback typically runs three years of payroll and contractor records.
Can this cover workers already on W-2, not just 1099s?
Yes. We test both directions: existing 1099 roles that may need reclassification to W-2, and W-2 roles a client is considering moving to contractor status, before that move creates exposure.
Aeternus Dynamics uses AI-assisted tools to help prepare and check compliance documents; all deliverables are reviewed by a qualified human before submission or use. Aeternus Dynamics is not a law firm and does not provide legal advice. See our Terms & Disclosures.