David owns and operates an accounting office and hired Sara 2 years ago to help with tax returns and client files. One day, David tells you, "I got a letter from California's Employment Development Department alleging I failed to withhold employee payroll taxes but Sara is not my employee - she's an independent contractor and I send her a 1099 IRS form every year. I don't get it, why would they say she's an employee?"

How would you educate David to know whether Sara is an employee or independent contractor?

Also, in brief 2-3 sentences, what is the consequences with respect to contract and tort liability to David whether she is or is not an employee?