How do I restructure my contractors as employees to comply with the new California Contractor Law?

If it's a client you want to work with and this is part of the client's requirements then yes, you should allow this or politely decline the business. The client has the right to ask for anything and you have the right to approve or decline. I ran an offshore software services company in Costa Rica after being a Division Manager at Cognizant and now I advise and work with 50 software companies in 25 countries and this is a common request that is complied with. This isn't to say you shouldn't make the reasonable argument that it is preferred that interviews are conducted just with team leads who will then vet and manage the rest of the team. Even though you recruited, vetted, hired and trained your employees, the client wants to validate that your standards and definitions of capabilities are in line with theirs. That is a reasonable exercise assuming you want the business and you feel that this investment of time and validation will lead to a long, fruitful relationship.

I would be curious to know why you feel it is important to use personality testing. I have hired over 20 sales reps and I have never used any testing. I have conversations with my hires because that is going to tell me more about their personality any day than a test. Plus you might eliminate someone because of a test score that could be a great fit for your organization. I have a pretty strong process for hiring sales people and could share with you my steps and even the questions if you would like.

What are the company's policies regarding the frequency and timing of employee reviews? Start by checking your employee handbook and make sure you completely understand the policies. You then have a decision to make: you can approach your boss to discuss the matter and try to work it out, you can talk to your HR professionals to ask them to address it on your behalf, or you can wait and ask if any adjustment to your compensation can be made retroactively, in light of the delay. Each strategy carries risks. The first two risk impacting your long term relationship with your boss. The last strategy is a financial risk but preserves the relationship. You have to ultimately decide what's most important to you, and what consequences you're willing to live with. Happy to talk with you directly if I can be of more help.

You already said it: "He isn't interested in salary as much as equity." If this developer is any bit worth his salt, he is worth the equity. A smaller piece of a bigger pie is far more valuable than a big piece of a small (or worthless) pie. Profit sharing is a red flag to me that just sounds "Cheap," unless you guys are making tons and tons of profit already. I don't know where you're based, but In Silicon Valley, a good developer can easily fetch $300-500k (base + bonus + yearly equity). UC Berkeley's average starting salary for NCGs majoring in EECS or Computer Science is $108k. Salary is something a good developer can easily get; why your startup (possibly unstable) rather than another more established company? If as the other person said, he walks and you're company is crippled, give him equity. Happy to chat more.

Please resist the urge to pull the band-aid. I'm not a fan of keeping a poor performer, but unless this person is a behavioral or "for cause" termination, he deserves some professionalism here. 30-day Performance Plan, make the goals aggressive and stick to it - he can consider that his head start to either buck up or start searching. Remember, your other employees watch how you treat their former colleagues. A quick termination before a holiday is prickish, an aggressive performance plan is taking care of business.