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Beginning January 1, 2001 California Unemployment Insurance Code section 1088.8 (SB 542, Ch. 99-480) will require businesses to notify the California Employment Development Department when using the services of an independent contractor. The provision applies even to businesses that are not employers. The new law provides that effective January 1, 2001, any service-recipient "who makes or is required to make a return to the Internal Revenue Service, in accordance with paragraph (A) of subdivision [sic] (a) of Section 6041 of the Internal Revenue Code (relating to payments made to service providers as compensation for services) shall file with the department information as required ... ."

This new provision only applies to service recipients engaged in business in California, deriving trade or business income from sources within California, or in any manner in the course of a trade or business subject to the laws of California. CUIC § 1088.8(b)(1). A business must report when aggregate payments equal or exceed $600 in any year or when entering into a contract or contracts for payments that in the aggregate equal or exceed $600.

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