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  • Diem Tran

Interview w/ Attorney Susan Zeme | Domestic Referral Agencies in California

Updated: Dec 30, 2021

In this video, attorney Susan Zeme answers some general questions regarding Domestic Referral Agencies in California. As a California attorney specializing in Employment Law, she shares specialized knowledge on the ins and outs of operating a compliant Domestic Referral Agency. Her insight does not extend to other states.

This interview answers some of the following questions:

Compliance & Technical Questions

Being in compliance with Independent Contractor laws involve both federal and state regulations.

  • What are the conflicts, if any, between the State of CA and IRS guidelines for classifying IC

  • In CA do DRA's have to submit de542 annually in addition to the first time

  • What types of services is most commonly referred out for DRAs besides house cleaning? Are there any domestic services you don’t recommend DRAs refer out?

  • Can you charge a cleaner a late fee?


  • What events can trigger an audit and which entities can audit a RA?

  • What is the process of an audit?

  • What are the most common things auditors look at to ensure compliance with IC regulations

  • What do you see that most DRAs get wrong

  • One of the fears is that even in the event a DRA is operating properly but an auditor sites in compliance, to appeal this would still cost a fortune. Is this true?

  • What type and price range of expenses that can result from failing an audit?

  • At what point is it best to consult an attorney in this process?

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  • Aside from defending against an audit, what other scenarios might a RA owner find themselves in where legal representation is needed?

  • Do you only take California clients or are you able to help clients in other states too?

  • What are some type of cases that you’ve successfully represented with regards to DRAs?

  • If there’s one piece of advice you can give to new DRA owners, what would it be


  • As businesses experience the struggle of operating an employee based cleaning company, many are looking for a way to properly transition to a referral agency model.

  • What is the best approach?

  • Why?

  • Can you keep the same business entity and change your operations or should you close or sell one down and open referral agency?

Subscriber Questions

  • Krystal wants to know: in CA Civil code says personal interviews not in person interviews, what does that mean?

  • Video interviews ok?

  • Electronic contracts ok?

  • Deb W asks: I’ve heard The IRS goes to the cleaning conventions and warns people that there is no way you can have 1099 workers in the cleaning industry you will be penalized. Is this right?

  • Kenneth asked: if I decide to change my model from employees to Independent Contractors, how can I go about the change of business without running the risk of having to sell my business and start over?

  • Josh asked: Can we have subcontractors/IC’s sign a non-solicitation and non compete contract? To prevent them from working directly with our customers?

This video was recorded May 2019 and doesn't address AB5. Although Susan did put out a memo regarding AB5 shared by CCDRA which I will link here too, as well as in the blog.

Cleaning Cash Flow is a resource center for cleaning referral agencies. Find helpful blogs and downloadable documents at

Attorney Susan Zeme has helped many Domestic Referral Agencies set up their businesses properly, and has defended many successfully in the case of an audit by the EDD. Her contact info can be found on her website.

The California Coalition of Domestic Referral Agencies is a nonprofit group that helps members understand the civil code and provides resources to aid in compliance.

California Civil Codes 1812.500 – 1812.5095 spells out the legal guidelines and requirements of operating Domestic Referral Agency in the state of California.

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