Carole Edman, HR Manager To Go - SKMurphy, Inc.
Development and implementation of employee handbooks, benefits, compensation, and performance management programs.
Her website has a rich set of resources on HR questions, one question that came up recently that she was very helpful with was how to determine whether a worker should be treated as an independent contractor or an employee. Here are some references to both Federal and CA rules that are with reviewing before you make this decision.
The FED & CA rules are not the same and many companies (including Microsoft, FedEx, many others) have had to pay huge fines for misclassifying workers as independent contractors (ICs). Audits occur when ICs who should have been employees make a claim for unemployment or state disability or are unhappy that you terminated their services, or just at random. They also occur when the IC has only one client and one 1099 in a year, or gets a W2 and 1099 from the same company in the same tax year. Several small clients of mine have been audited and it is a time-consuming, expensive process, to be avoided if at all possible. The EDD has become very aggressive in auditing for non-compliance, as it is a way for them to bring in $$ with fines and back taxes (payable by the employer, regardless of whether the employee/IC already paid them; they are double collected).
Carole has been very helpful to a number of folks I know. If you are a Silicon Valley startup I would encourage you to keep her HR Manager To Go website on your list of resources for when those thorny employment and human resources issues come up (or if you want to prevent problems consider being pro-active about an employee handbook).