Things to Consider When Appealing an L&I Audit Decision (Part 1)

So you’ve received an L&I Audit Assessment, and you’re trying to determine: if you should appeal; whether the amount is even worth appealing; whether you need an attorney to appeal; and how far you should appeal. All of these are important questions/decisions that can have serious legal and financial consequences. We’ll address each of these topics in four blog posts, starting below with whether you should appeal.

Should you appeal?

Yes. Usually.

Almost every L&I audit decision needs to be appealed. At a minimum, an L&I Audit decision should be appealed to request a waiver of penalties and interest. Penalties and interest are applied at the discretion of an auditor, and will usually be reduced during an appeal, so for that reason alone, it’s worth filing an appeal to request waiver of penalties and interest.

With regard to the findings underlying the decision, not every finding needs to be appealed. This is because it’s very often the case that L&I gets it right. That is, if an L&I auditor is given correct and complete information during the audit, and based on that information, they found you used the wrong risk classification for your workers, then it’s very likely that you in fact used the wrong risk classification. Or if L&I found that your independent contractors are covered workers, then it’s likely because they found that the contractors did not have business licenses, or that that they did not have actual businesses, or that they did not meet some or all parts of the independent contractor test. Or if L&I determines that you underreported hours, then it’s likely the case that you did not report the correct number of workers. So while it can be a popular reaction to bash the government and its investigators, it’s rarely the case that an auditor who received correct and complete information during an audit will arrive at an incorrect decision. There are of course times when an audit decision can be completely baseless, but it’s not the norm.

While auditors will generally arrive at the right decision if given correct and complete information, it’s almost always worth appealing an audit decision if the audit result was based on incomplete information.  If, for example, you went through an audit and you weren’t able to provide all the information the auditor requested, and the auditor made a decision without that information, the decision is likely to be incorrect, thus providing basis to appeal. Or if you received an audit decision, and the auditor made assumptions about your workers and amounts paid to them, resulting in an assessment against you, then such a decision is clearly incorrect, and thus subject to an appeal. Of if you unwisely thought it was a good strategy to not cooperate with an audit, and the auditor issued a decision without your participation based on estimates, then that decision is one you’ll want to appeal in order to cooperate and reach the correct result.

Bottomline, whenever a decision is based on incomplete or inaccurate information, resulting in an assessment against you, then it’s almost always worth considering pursuing an appeal, assuming it’s not a tiny assessment amount. See Part 2 of 4.

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