Definitions of Employer and Employment

For UI purposes, an “employer” is any entity that employs one or more workers and has paid wages in excess of $100 during any calendar quarter within the current or previous calendar year.

“Employment” means “service, including service in interstate commerce, performed by an employee for wages or under any contract of hire, written or oral, explicit or implied.”1

Typically, employment occurs when you engage the services of an employee for pay. If all of the work is performed in California, it is covered by California’s UI program. If the work is performed in more than one state, there are four tests used to determine which state has jurisdiction for coverage of the employee’s services:2

• Location of the service performed.
• Base of operations.
• Place from which services are controlled and directed.
• Employee’s residence.

If a base of operations is not located in any one state, but the employee’s activities generally are directed and controlled from California, the employee’s services fall under California law. If a place of direction and control is not located in any one state, but the employee is a California resident and performs some services in California, the employee falls under California law.

Casual Labor

Services not in an entity’s general course of trade or business will be excluded from employment unless: (1) an entity pays a worker $50 or more during any calendar quarter; and (2) the entity regularly employs the worker to provide this service. A worker is considered to be regularly employed if they’ve worked 24 days or partial days during a calendar quarter.3

Service that is not in an entity’s general course of trade or business is work that does not advance or promote the employing entity’s business.

This is the only exclusion for casual labor, which usually covers work done in connection with private residences or other noncommercial projects.

Work of any duration and wages of any amount paid by an organization to a worker are not excluded as casual labor. Wages are generally taxable unless other exclusions apply.

Motion Picture Production Workers

The law allows temporary or transitory motion picture employment performed outside the state to count toward unemployment eligibility requirements as long as the motion picture worker is a California resident, is hired and dispatched from the state, and intends to return to the state to seek reemployment when the out-of-state work is finished.

Specific Individuals Excluded From Unemployment Taxes

Certain individuals are excludedfrom coverage under the UI Code. The employment exclusions listed in this section apply to all employers:

• Workers who provide household domestic service if the worker is paid less than $1,000 per calendar quarter.4
• Transcribers of depositions, court proceedings and hearings performed away from the office of the person, firm or association obligated to produce a transcript of these proceedings.5
• Children who are employed by their mother and/or father.6
• Individuals who work for their children or spouses.7
• Temporary or adjunct teachers at private postsecondary institutions.8
• Federal employees and employees of other states.9
• Incarcerated individuals.10
• Workers for political candidates and election campaigns.11
• Officers and directors of corporations not covered by the Federal Unemployment Tax Act.12
• Students and spouses working at the student’s school.13
• Full-time students working for organized camps.14
• Individuals working in the service of foreign governments and international organizations.15
• Individuals working under formal agreement for agencies owned by foreign governments.16
• Student nurses and interns working for hospitals or training schools.17
• Students less than 22 years old in a work experience program.18
• Patients employed by a hospital.19
• Individuals working outside the United States on a foreign vessel or aircraft.20
• Newspaper salespeople and delivery people under the age of 18.21
• Real estate, mineral, oil and gas or cemetery brokers.
• Real estate or cemetery salespeople.
• Yacht brokers and salespeople.22
• Golf caddies.23
• Elected or appointed officials of any nonprofit fraternal corporation or association that is not covered by the Federal Unemployment Tax Act if the compensation does not exceed $100 per month.24
• Baseball players who work for expenses and a share of profits.25
• Jockeys and exercise boys licensed by the California Horse Racing Board.26
• Foreign athletes for occasional professional engagements.27
• Consultants and independent contractors.28
• Direct salespeople who perform in-person and in-home demonstration and sales presentations of consumer products, including services or other intangibles.29

Unemployment Insurance and Household Employers

Household employment is provided in a variety of settings, such as in a private home, a local college club, or the local chapter of a college fraternity or sorority. Household workers may include, but are not limited to, cooks, waiters, waitresses, butlers, housekeepers, governesses, governors, maids, valets, babysitters, janitors, laundry workers, caretakers, home health care workers, handy persons, gardeners, chauffeurs, crews of private yachts, and pilots of private airplanes for family use.

Household employment does not include services performed by private secretaries, tutors, librarians, musicians, carpenters, plumbers, electricians, painters, or other skilled craftsmen.30

You need not pay UI tax for household workers if you pay the workers less than $1,000 per calendar quarter.31 After a worker’s cash wages reach $1,000 for the calendar quarter, you must report and pay contributions on the reasonable cash value of any other compensation, such as meals and lodging. Download the EDD’s DE 231L - Household Employer’s Guide at the EDD website.

Unemployment Insurance and Independent Contractors

The distinction between independent contractors and employees is not always clear.

The EDD determines independent contractor status by applying a rigid “ABC test,” under which an individual performing work for remuneration is considered an employee unless the hiring entity can establish that the worker is (1) free from the control and direction of the hiring entity in connection with the performance of the work; (2) the worker performs work that is outside the usual course of the hiring entity’s business; and (3) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. To read more about the law, see Independent Contractor.

Unlike employees, independent contractors cannot claim UI benefits. Employers do not pay UI or other payroll taxes on the independent contractor’s earnings. This distinction is important. If you improperly classify employees as independent contractors, you may be held liable for thousands of dollars in back payroll taxes for the time the workers were improperly classified.

Professional services performed by a consultant working as an independent contractor are excluded from UI coverage. According to the UI code, individuals who perform work that requires specialized knowledge or skills attained through course work or experience are not employees. The areas of work are limited to attorneys, physicians, dentists, engineers, architects, accountants and physical, chemical, natural and biological scientists.32

For extensive information on federal requirements for independent contractor status, visit the IRS website To obtain information on state requirements, which vary from federal requirements, visit the EDD’s website.

For more information on independent contractors, see Independent Contractor.

Unemployment Insurance and Government Entities

The following employees of governmental entities and Indian tribes are excluded from UI coverage:

• Elected officials, who are not considered employees of the governmental entity
• Members of legislative bodies or the judiciary
• Members of an Indian tribe’s tribal council
• Members of the State National Guard or Air National Guard, except people who render these services as regular state employees
• Individuals hired on a temporary basis in case of fire, storm, snow, earthquake, flood or other similar emergency
• Individuals in major nontenured policymaking or advisory positions, which are designated pursuant to state and tribal law
• Individuals in policymaking or advisory positions whose duties do not require more than eight hours per week, which are designated pursuant to state and tribal law
• Election officials or election workers, if they are not expected to earn at least $1,000 in a calendar year
• Individuals in a program for rehabilitation for individuals whose earning capacity is impaired by age, physical or mental deficiency or injury
• Individuals in a program that provides compensated work for individuals who, because of their impaired physical or mental capacity, have difficulty finding employment in the competitive labor market
• Individuals who are part of a work relief or work training program that is financed by a federal or state agency or by an Indian tribe33

Unemployment Insurance and Nonprofit Organizations

In general, the term “employment” covers services performed in the employ of a religious, charitable, educational or other nonprofit organizations described in section 501(c)(3) of the IRC. However, the following individuals who work for one of these types of organizations are excluded from UI coverage:34

• Individuals employed by a church or convention or association of churches
• Individuals employed by an organization operated primarily for religious purposes, which is operated, supervised, controlled or principally supported by a church or a convention or association of churches
• Duly ordained, commissioned or licensed ministers in the exercise of their ministry
• Members of religious orders in the exercise of duties required by their order
• Individuals in a program for rehabilitation for individuals whose earning capacity is impaired by age, physical or mental deficiency or injury
• Individuals in a program that provides compensated work for individuals who, because of their impaired physical or mental capacity, have difficulty finding employment in the competitive labor market

Unemployment Insurance and Salespeople

The following salespeople are generally excluded from UI if they meet certain conditions:

• Real estate
• Mineral, oil and gas services
• Cemetery brokers
• Direct sales salespeople
• Yacht brokers

To be excluded from UI, these salespeople must meet all of the following conditions:35

• The individual is licensed under specific provisions of the Business and Professions Code, or is in the business of primarily in-person demonstrations and sales of consumer products in the home or sales to any buyer for resale in the home or otherwise, rather than from a retail or wholesale establishment.
• Most of the payment for services is directly related to sales rather than to hours worked.
• The individual renders services under a written contract that states that they will not be treated as an employee for state tax purposes.

Unemployment Insurance and Newspaper Carriers and Magazine Vendors

Individuals under the age of 18 who deliver or distribute newspapers, shopping news or magazines to consumers are excluded from UI unless the individual works full-time and their school attendance is incidental to full-time employment.36

Individuals who buy newspapers or magazines at one price, sell them to consumers at a higher price and keep the difference as compensation are excluded from UI. These individuals are excluded from UI even if they are guaranteed a minimum amount of compensation or they are credited with the unsold newspapers or magazines they return.37

Unemployment Insurance and National Service Programs

Services performed as a participant in a national service program, such as AmeriCorps, do not constitute employment for purposes of unemployment or disability insurance and are excluded from UI.38

1. UI Code sec. 601

2. UI Code sec. 602

3. UI Code sec. 640

4. UI Code sec. 629

5. UI Code sec. 630

6. UI Code sec 631

7. UI Code sec 631

8. UI Code sec. 633

9. UI Code sec 632

10. UI Code sec. 633.1

11. UI Code sec. 636

12. UI Code sec. 637

13. UI Code sec. 642

14. UI Code sec. 642

15. UI Code sec. 643

16. UI Code sec. 644

17. UI Code sec. 645

18. UI Code sec. 646

19. UI Code sec. 647

20. UI Code sec. 648

21. UI Code sec. 649

22. UI Code sec. 650

23. UI Code sec. 651

24. UI Code sec. 652

25. UI Code sec. 653

26. UI Code sec. 654

27. UI Code sec. 655

28. UI Code sec. 656

29. UI Code sec. 650

30. EDD DE 231L Rev. 32 (12/17)

31. UI Code sec. 682

32. UI Code sec. 656

33. UI Code sec. 634.5

34. UI Code sec. 634.5

35. UI Code sec. 650

36. UI Code sec. 649

37. UI Code sec. 649

38. UI Code sec. 634.5